IMPORTANT NOTICE

THIS BASE PROSPECTUS IS AVAILABLE ONLY TO INVESTORS WHO ARE NOT U.S. PERSONS (ASDEFINED IN REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE“SECURITIES ACT”) LOCATED OUTSIDE THE UNITED STATES IN ACCORDANCE WITHREGULATION S (“REGULATION S”).

IMPORTANT: You must read the following before continuing. The following applies to the Base Prospectusfollowing this page whether received by email, accessed from an internet page or otherwise received as a result ofelectronic communication, and you are therefore advised to read this page carefully before reading, accessing ormaking any other use of the Base Prospectus. In reading, accessing or making any other use of the Base Prospectus,you agree to be bound by the following terms and conditions and each of the restrictions set out in the BaseProspectus, including any modifications to them from time to time each time you receive any information from theIssuer, the Arranger or the Dealers (each as defined in the Base Prospectus) as a result of such access.

NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FORSALE OR A SOLICITATION OF AN OFFER TO BUY SECURITIES IN THE UNITED STATES OR ANYOTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE NOTES DESCRIBED IN THE BASEPROSPECTUS HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE UNITED STATESSECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITEDSTATES OR OTHER JURISDICTION, AND THE NOTES MAY NOT BE OFFERED OR SOLD, DIRECTLYOR INDIRECTLY, WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) EXCEPT PURSUANT TOAN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATIONREQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS.

THE ATTACHED BASE PROSPECTUS MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHERPERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER AND, IN PARTICULAR,MAY NOT BE FORWARDED TO ANY U.S. PERSON OR U.S. ADDRESS. ANY FORWARDING,DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED.FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIESACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. IF YOU HAVE GAINED ACCESS TO THISTRANSMISSION CONTRARY TO ANY OF THE FOREGOING RESTRICTIONS, YOU ARE NOTAUTHORISED AND WILL NOT BE ABLE TO PURCHASE ANY OF THE NOTES DESCRIBED IN THEATTACHED DOCUMENT.

Confirmation of your representation: In order to be eligible to view the attached Base Prospectus or make aninvestment decision with respect to the securities that may be offered, prospective investors must be non U.S. persons(as defined in Regulation S) located outside the United States. This Base Prospectus is being sent to you at yourrequest, and by accessing this Base Prospectus you shall be deemed to have represented to the Issuer and theArrangers that (1) (a) you are not a U.S. Person and (b) the electronic mail address that you gave us and to whichthis email has been delivered is not located in the United States, its territories and possessions, any State of theUnited States or the District of Columbia and (2) you consent to delivery of such Base Prospectus by electronictransmission. You are reminded that this Base Prospectus has been delivered to you on the basis that you are a personinto whose possession this Base Prospectus may be lawfully delivered in accordance with the laws of the jurisdictionin which you are located and you may not, nor are you authorised to, deliver this Base Prospectus to any otherperson. The materials relating to this offering do not constitute, and may not be used in connection with, an offer orsolicitation in any place where offers or solicitations are not permitted by law.

This Base Prospectus is only being distributed to and is only directed at (i) persons who are outside the UnitedKingdom; or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act2000 (Financial Promotion) Order 2005 (the “Order”) and (iii) to high net worth entities and other persons to whomit may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons in (i), (ii) and(iii) above together being referred to as “relevant persons”). This Base Prospectus is only available to and is onlydirected at relevant persons. Any person who is not a relevant person should not act or rely on this document or anyof its contents.

The attached Base Prospectus has been sent to you in electronic form. You are reminded that documents transmittedvia this medium may be altered or changed during the process of electronic transmission and consequently none ofthe Issuer, the Arranger, the Dealers nor any person who controls them nor any director, officer, employee or agentof them or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any differencebetween the Base Prospectus distributed to you in electronic format and the hard copy version.

The distribution of the Base Prospectus in certain jurisdictions may be restricted by law. Persons into whosepossession the Base Prospectus comes are required by the Issuer and the Arrangers to inform themselvesabout, and to observe, any such restrictions.

BASE PROSPECTUS

„LIETUVOS ENERGIJAˮ, UAB(incorporated with limited liability under the laws of the Republic of Lithuania)

EUR 1,000,000,000Euro Medium Term Note Programme

„Lietuvos energijaˮ, UAB (the “Issuer”) has established a Euro Medium Term Note Programme (the “Programme”) for theissuance of up to EUR 1,000,000,000 in aggregate principal amount of notes (the “Notes”). The maximum aggregate nominalamount of all Notes from time to time outstanding under the Programme will not exceed EUR 1,000,000,000 (or its equivalentin other currencies calculated as described in the Programme Agreement described herein), subject to increase as describedherein.

This Base Prospectus has been approved by the Luxembourg Commission de Surveillance du Secteur Financier (the “CSSF”),which is the Luxembourg competent authority for the purpose of Directive 2003/71/EC, as amended, (the “ProspectusDirective”) and relevant implementing measures in Luxembourg, as a base prospectus issued in compliance with the ProspectusDirective and relevant implementing measures in Luxembourg for the purpose of giving information with regard to Notes issuedunder the Programme described in this Base Prospectus during the period of twelve months after the date hereof. Applicationshave also been made for such Notes to be admitted during the period of twelve months after the date hereof to listing on theofficial list (the “Official List”) and to trading on the regulated market (the “Regulated Market”) of the Luxembourg StockExchange. The Regulated Market of the Luxembourg Stock Exchange is a regulated market for the purposes of Directive2004/39/EC of the European Parliament and of the Council on markets in financial instruments. The Programme also permitsNotes to be issued on the basis that they will not be admitted to listing, trading and/or quotation by any competent authority,stock exchange and/or quotation system or to be admitted to listing, trading and/or quotation by such other or further competentauthorities, stock exchanges and/or quotation systems as may be agreed with the Issuer (which may include the Nasdaq VilniusStock Exchange). Application has been made for a certificate of approval under Article 18 of the Prospectus Law 2005 to beissued by the CSSF to the competent authority in the Republic of Lithuania. This document will be published on the website ofthe Luxembourg Stock Exchange (www.bourse.lu).

By approving this Base Prospectus, investors should note that the CSSF, in its capacity as competent authority under theProspectus Law 2005, assumes no responsibility as to the economic and financial soundness of any transactions contemplatedby this Base Prospectus or the quality or solvency of the Issuer, in line with Article 7(7) of the Prospectus Law 2005.

The Issuer has been assigned a long-term senior unsecured rating of BBB+ (stable outlook) by Standard & Poor’s Credit MarketServices Europe Limited (“Standard & Poor’s”) but the Programme has not been separately rated. Standard & Poor’s isestablished in the European Economic Area (“EEA”) and registered under Regulation (EU) No 1060/2009, as amended (the“CRA Regulation”). Tranches of Notes to be issued under the Programme will be rated or unrated. Where a Tranche (as definedherein) of Notes is to be rated, such rating will not necessarily be the same as the rating assigned to the Issuer.

A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawalat any time by the assigning rating agency.

Investing in Notes issued under the Programme involves certain risks. The principal risk factors that may affect the abilities ofthe Issuer to fulfil its obligations under the Notes are discussed under “Risk Factors” below.

The Notes have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “SecuritiesAct”) or with any securities regulatory authority of any state or other jurisdiction of the United States, and Notes in bearer formare subject to U.S. tax law requirements. The Notes may not be offered, sold or (in the case of Notes in bearer form) deliveredwithin the United States or to U.S. persons (as defined in Regulation S under the Securities Act (“Regulation S”)) except incertain transactions exempt from the registration requirements of the Securities Act.

ArrangerBNP PARIBAS

DealersBNP PARIBAS SEB

Base Prospectus dated 27 June 2017

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CONTENTS

Page

IMPORTANT NOTICES ..........................................................................................................................................3

FORWARD-LOOKING STATEMENTS..................................................................................................................6

HISTORICAL AND CURRENT MARKET AND INDUSTRY DATA...................................................................7

RISK FACTORS .......................................................................................................................................................8

GENERAL DESCRIPTION OF THE PROGRAMME..........................................................................................24

PRESENTATION OF FINANCIAL INFORMATION OF THE GROUP .............................................................28

OVERVIEW OF FINANCIAL INFORMATION...................................................................................................32

FINAL TERMS AND DRAWDOWN PROSPECTUSES......................................................................................38

FORMS OF THE NOTES.......................................................................................................................................39

OVERVIEW OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM............................44

TERMS AND CONDITIONS OF THE NOTES....................................................................................................46

FORM OF FINAL TERMS.....................................................................................................................................68

USE OF PROCEEDS..............................................................................................................................................75

DESCRIPTION OF THE GROUP..........................................................................................................................76

DESCRIPTION OF OTHER INDEBTEDNESS..................................................................................................101

MANAGEMENT ..................................................................................................................................................103

RELATED PARTY TRANSACTIONS ................................................................................................................109

REGULATION......................................................................................................................................................110

TAXATION ...........................................................................................................................................................130

SUBSCRIPTION AND SALE ..............................................................................................................................133

GLOSSARY ..........................................................................................................................................................135

GENERAL INFORMATION................................................................................................................................136

INDEX TO CONSOLIDATED FINANCIAL INFORMATION ..........................................................................F-1

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IMPORTANT NOTICES

Responsibility for this Base Prospectus

The Issuer accepts responsibility for the information contained in this Base Prospectus and declares that, havingtaken all reasonable care to ensure that such is the case, the information contained in this Base Prospectus is, to thebest of its knowledge, in accordance with the facts and contains no omission likely to affect its import.

Final Terms/Drawdown Prospectus

Each Tranche (as defined herein) of Notes will be issued on the terms set out herein under “Terms and Conditionsof the Notes” (the “Conditions”) as supplemented by a document specific to such Tranche called final terms (the“Final Terms”) or in a separate prospectus specific to such Tranche (the “Drawdown Prospectus”) as describedunder “Final Terms and Drawdown Prospectuses” below.

Other Relevant Information

This Base Prospectus must be read and construed together with any supplements hereto and, in relation to anyTranche of Notes which is the subject of Final Terms, must be read and construed together with the relevant FinalTerms. In the case of a Tranche of Notes which is the subject of a Drawdown Prospectus, each reference in thisBase Prospectus to information being specified or identified in the relevant Final Terms shall be read and construedas a reference to such information being specified or identified in the relevant Drawdown Prospectus unless thecontext requires otherwise.

The Issuer has confirmed to the Dealers named under “Subscription and Sale” below that this Base Prospectuscontains all information which is (in the context of the Programme and the issue, offering and sale of the Notes)material; that such information is true and accurate in all material respects and is not misleading in any materialrespect; that any opinions, predictions or intentions expressed herein are honestly held or made and are notmisleading in any material respect; that this Base Prospectus does not omit to state any material fact necessary tomake such information, opinions, predictions or intentions (in the context of the Programme and the issue, offeringand sale of the Notes) not misleading in any material respect; and that all proper enquiries have been made to verifythe foregoing.

Unauthorised Information

No person has been authorised to give any information or to make any representation not contained in or notconsistent with this Base Prospectus or any other document entered into in relation to the Programme or anyinformation supplied by the Issuer or such other information as is in the public domain and, if given or made, suchinformation or representation should not be relied upon as having been authorised by the Issuer or any Dealer.

Neither the Dealers nor any of their respective affiliates have authorised the whole or any part of this Base Prospectusand none of them makes any representation or warranty or accepts any responsibility as to the accuracy orcompleteness of the information contained in this Base Prospectus. Neither the delivery of this Base Prospectus orany Final Terms nor the offering, sale or delivery of any Note shall, in any circumstances, create any implicationthat the information contained in this Base Prospectus is true subsequent to the date hereof or the date upon whichthis Base Prospectus has been most recently supplemented or that there has been no adverse change, or any eventreasonably likely to involve any adverse change, in the prospects or financial or trading position of the Issuer sincethe date thereof or, if later, the date upon which this Base Prospectus has been most recently supplemented or thatany other information supplied in connection with the Programme is correct at any time subsequent to the date onwhich it is supplied or, if different, the date indicated in the document containing the same.

Restrictions on Distribution

The distribution of this Base Prospectus and any Final Terms and the offering, sale and delivery of the Notes incertain jurisdictions may be restricted by law. Persons into whose possession this Base Prospectus or any FinalTerms comes are required by the Issuer and the Dealers to inform themselves about and to observe any suchrestrictions. For a description of certain restrictions on offers, sales and deliveries of Notes and on the distributionof this Base Prospectus or any Final Terms and other offering material relating to the Notes, see “Subscription andSale”. In particular, Notes have not been, and will not be, registered under the United States Securities Act of 1933(as amended) (the “Securities Act”) and are subject to U.S. tax law requirements. Subject to certain exceptions,Notes may not be offered, sold or delivered within the United States or to U.S. persons.

Neither this Base Prospectus nor any Final Terms constitutes an offer or an invitation to subscribe for or purchaseany Notes and should not be considered as a recommendation by the Issuer, the Dealers or any of them that any

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recipient of this Base Prospectus or any Final Terms should subscribe for or purchase any Notes. Each recipient ofthis Base Prospectus or any Final Terms shall be taken to have made its own investigation and appraisal of thecondition (financial or otherwise) of the Issuer.

Programme Limit

The maximum aggregate principal amount of Notes outstanding at any one time under the Programme will notexceed EUR 1,000,000,000 and for this purpose, any Notes denominated in another currency shall be translatedinto euros at the date of the agreement to issue such Notes (calculated in accordance with the provisions of theDealer Agreement). The maximum aggregate principal amount of Notes which may be outstanding at any one timeunder the Programme may be increased from time to time, subject to compliance with the relevant provisions of theDealer Agreement as defined under “Subscription and Sale”.

Use of Proceeds

None of the Dealers will verify or monitor the proposed use of proceeds of Notes issued under the Programme.

Certain Definitions

In this Base Prospectus, unless otherwise specified, references to a “Member State” are references to a MemberState of the EEA, references to “U.S.$”, “U.S. dollars” or “dollars” are to United States dollars, references to“EUR” or “euro” are to the currency introduced at the start of the third stage of European economic and monetaryunion, and as defined in Article 2 of Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of theeuro, as amended. In addition, unless otherwise defined in this Base Prospectus, capitalised terms shall have themeanings given to them in the section headed “Glossary”.

Rounding

Certain figures included in this Base Prospectus have been subject to rounding adjustments; accordingly, figuresshown for the same category presented in different tables may vary slightly and figures shown as totals in certaintables may not be an arithmetic aggregation of the figures which precede them.

Ratings

Tranches of Notes issued under the Programme may be rated or unrated. Where a Tranche of Notes is rated, suchrating will not necessarily be the same as the rating(s) described above or the rating(s) assigned to Notes alreadyissued. Where a Tranche of Notes is rated, the applicable rating(s) will be specified in the relevant Final Terms.Whether or not each credit rating applied for in relation to a relevant Tranche of Notes will be (1) issued by a creditrating agency established in the EEA and registered under the CRA Regulation, or (2) issued by a credit ratingagency which is not established in the EEA but will be endorsed by a CRA which is established in the EEA andregistered under the CRA Regulation or (3) issued by a credit rating agency which is not established in the EEA butwhich is certified under the CRA Regulation will be disclosed in the Final Terms. In general, European regulatedinvestors are restricted from using a rating for regulatory purposes if such rating is not issued by a credit ratingagency established in the EEA and registered under the CRA Regulation or (1) the rating is provided by a creditrating agency not established in the EEA but is endorsed by a credit rating agency established in the EEA andregistered under the CRA Regulation or (2) the rating is provided by a credit rating agency not established in theEEA which is certified under the CRA Regulation.

Notice to Investors

The Notes may not be a suitable investment for all investors. Each potential investor in the Notes must determinethe suitability of that investment in light of its own circumstances. In particular, each potential investor may wishto consider, either on its own or with the help of its financial and other professional advisers, whether it:

(a) has sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks ofinvesting in the Notes and the information contained or incorporated by reference in this Base Prospectus orany applicable supplement;

(b) has access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financialsituation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio;

(c) has sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, includingNotes where the currency for principal or interest payments is different from the potential investor’s currency;

(d) understands thoroughly the terms of the Notes and is familiar with the behaviour of financial markets; and

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(e) is able to evaluate possible scenarios for economic, interest rate and other factors that may affect its investmentand its ability to bear the applicable risks.

Stabilisation

In connection with the issue of any Tranche of Notes, the Dealer or Dealers (if any) named as the StabilisationManager(s) (or persons acting on behalf of any Stabilisation Manager(s)) in the applicable Final Terms mayover allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higherthan that which might otherwise prevail. However, stabilisation may not necessarily occur. Any stabilisationaction may begin on or after the date on which adequate public disclosure of the terms of the offer of therelevant Tranche of Notes is made and, if begun, may cease at any time, but it must end no later than theearlier of 30 days after the issue date of the relevant Tranche of Notes and 60 days after the date of theallotment of the relevant Tranche of Notes. Any stabilisation action or over-allotment must be conducted bythe relevant Stabilisation Manager(s) (or person(s) acting on behalf of any Stabilisation Manager(s)) inaccordance with all applicable laws and rules.

IMPORTANT – EUROPEAN ECONOMIC AREA RETAIL INVESTORS

If the applicable Final Terms in respect of any Notes includes a legend entitled “Prohibition of Sales toEuropean Economic Area Retail Investors”, the Notes are not intended from 1 January 2018 to be offered,sold or otherwise made available to and, with effect from such date, should not be offered, sold or otherwisemade available to any retail investor in the European Economic Area (“EEA”). For these purposes, a retailinvestor means a person who is one (or more) of (i) a retail client as defined in point (11) of Article 4(1) ofDirective 2014/65/EU (“MiFID II”) or (ii) a customer within the meaning of Directive 2002/92/EC (“IMD”),where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFIDII. Consequently no key information document required by Regulation (EU) No 1286/2014 (the “PRIIPsRegulation”) for offering or selling the Notes or otherwise making them available to retail investors in theEuropean Economic Area has been prepared and therefore offering or selling the Notes or otherwise makingthem available to any retail investor in the European Economic Area may be unlawful under the PRIIPsRegulation.

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FORWARD-LOOKING STATEMENTS

This Base Prospectus includes forward-looking statements. These forward-looking statements can be identified bythe use of forward-looking terminology, including the terms “believe,” “estimate,” “anticipate,” “expect,” “forecast,”“foresee,” “aim,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “will,” “would” or, in each case, similarexpressions or the negative thereof, or other variations or comparable terminology. These forward-looking statementsinclude all matters that are not historical facts. Such forward-looking statements are necessarily dependent onassumptions, data or methods that may be incorrect or imprecise and that may be incapable of being realised. Theyappear in a number of places throughout this Base Prospectus and include statements regarding the Group’s or theIssuer’s intentions, beliefs or current expectations concerning, among other things, the Group’s results of operations,financial condition, liquidity, prospects, growth, strategies and the industry in which the Group operates.

By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factorsbecause they relate to events and depend on circumstances that may or may not occur in the future. The Issuercautions prospective investors that forward-looking statements are not guarantees of future performance and thatthe actual results of the Group’s operations, including its financial condition and liquidity, and the development ofthe Group’s industry may differ materially from those made in or suggested by the forward-looking statementscontained in this Base Prospectus. In addition, even if the Group’s results of operations, financial condition andliquidity, and the development of the Group’s industry are consistent with the forward-looking statements containedin this Base Prospectus, those results or developments may not be indicative of results or developments in subsequentperiods. Factors that could cause these differences include, but are not limited to:

• a decrease in demand for electricity and gas;

• the Group’s strategy, outlook and growth prospects;

• the Group’s ability to expand its business and our generation capacity;

• fluctuations in electricity generated by the Group’s power plants;

• changes in government regulation and expectations as to future governmental policies and actions;

• unanticipated increases in fuel and other costs;

• fluctuations in interest rates and other market conditions, including foreign currency exchange rates;

• the Group’s ability to generate cash flow and to finance its capital expenditure needs;

• any decision by the Government of the Republic of Lithuania (the “Government”) to undertake a partial orfull privatisation of the Issuer;

• diverse political, economic, legal, tax and other conditions affecting the markets in which the Group operates;

• competition in the markets in which the Group operates and its ability to compete in such markets;

• costs, liabilities and penalties the Group may incur in connection with litigation;

• other risks and factors discussed in this Base Prospectus including those under the heading “Risk Factors”; and

• other factors that are unforeseen or beyond the Group’s control.

Although the Issuer believes the expectations reflected in any forward-looking statement are reasonable, the Issuercannot give any assurance that they will materialise or prove to be correct.

The Issuer urges prospective investors to read “Risk Factors”, “Description of the Issuer” and “Regulation” for amore complete discussion of the factors that could affect the Issuer’s future performance, its industry and relatedregulation thereof. In light of these risks, uncertainties and assumptions, the events described or suggested by theforward-looking statements in this Base Prospectus may not occur.

These forward looking statements speak only as of the date on which the statements were made. Except as requiredby law or applicable stock exchange rules or regulations, the Issuer undertakes no obligation to update or revisepublicly any forward looking statement, whether as a result of new information, future events or otherwise. Allsubsequent written and oral forward looking statements attributable to the Issuer or to persons acting on its behalfare expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere inthis Base Prospectus.

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HISTORICAL AND CURRENT MARKET AND INDUSTRY DATA

Certain information contained in this Base Prospectus was derived from various public sources, includinginformation published by the National Commission for Energy Control and Prices and the United NationsFramework Convention on Climate Change. Where information has been sourced from a third party, the source hasbeen identified, the information has been accurately reproduced and (as far as the Issuer is aware and is able toascertain from information published by that third party) no facts have been omitted which could render thereproduced information inaccurate or misleading.

The Issuer believes that the market and industry information contained in this Base Prospectus provides fair andadequate estimates of the size of the Group’s market and fairly reflects the Group’s competitive position within thatmarket. However, the Group’s internal company surveys and management estimates have not been verified by anyindependent expert, and the Issuer cannot give any assurance that a third party using different methods to assemble,analyse or calculate market data would obtain or generate the same results.

Industry publications, surveys and forecasts generally state that the information contained therein has been obtainedfrom sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. TheIssuer believes that these industry publications, surveys and forecasts are reliable but the Issuer has not independentlyverified them and cannot guarantee their accuracy or completeness. Further, the information presented in this BaseProspectus has been derived from several sources, as there is no single industry report or other source that coversall of the areas in which the Group conducts its operations.

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RISK FACTORS

Any investment in the Notes is subject to a number of risks. Prior to investing in Notes issued under the Programme,prospective investors should carefully consider risk factors associated with any investment in any Notes, the businessof the Issuer and the Group and the industry in which it operates together with all other information contained inthis Base Prospectus, including, in particular the risk factors described below. Words and expressions defined inthe “Terms and Conditions of the Notes” below or elsewhere in this Base Prospectus have the same meanings inthis section.

The following should be used as guidance only but are the material risks that the Issuer believes to be the mostrelevant to an assessment by a prospective investor of whether to consider an investment in Notes issued under theProgramme. Additional risks and uncertainties relating to the Issuer and the Group that are not currently known tothe Issuer at the date of this Base Prospectus, or that it currently deems immaterial as at such date, may individuallyor cumulatively also have a material adverse effect on the business, prospects, results of operations and/or financialposition of the Issuer and/or the Group and, if any such risk should occur, the price of the Notes may decline andinvestors could lose all or part of their investment. Investors should consider carefully whether an investment inNotes issued under the Programme is suitable for them in light of the information in this Base Prospectus and theirpersonal circumstances.

This Base Prospectus also contains forward-looking statements that involve risks and uncertainties. The actualresults of the Group may differ materially from those anticipated in these forward-looking statements as a result ofvarious factors, including the risks described below and elsewhere in this Base Prospectus. Please see “Forward-Looking Statements”.

RISKS RELATING TO THE ISSUER

Risks Relating to the Regulatory and Legal Environment

The Group is subject to regulations in Lithuania and other countries in which it operates and these regulationsare complex and subject to change.

The Group is subject to the laws of Lithuania and other countries and jurisdictions including Latvia, Estonia, Polandand the European Union (“E.U.”), as well as the regulations of the regulatory agencies of Lithuania and the othercountries in which it operates, see “Regulation”. These laws and regulations, particularly those of Lithuania, affectmany aspects of the Group’s business and, in many respects, determine the manner in which the Group conducts itsbusiness and the fees it charges or obtains for its products and services, including in respect of electricity distributionand generation (both from traditional and renewable sources) and gas distribution. In particular, as an owner andoperator of gas and oil-fired power plants, renewable energy facilities and electricity and gas distribution and heatgeneration businesses, and as public supplier of electricity and a developer of combined electricity and heatgeneration plants in Lithuania, the Group is subject to extensive governmental and other regulations in Lithuania.

For the year ended 31 December 2016, 77 per cent. of the Group’s revenue and 81 per cent. of the Group’s adjustedEBITDA depended on regulated tariffs (including electricity distribution prices and natural gas prices). Such tariffsare set by the NCC in Lithuania for periods of between six months (for public supply of electricity) and five years.The NCC may decide to limit or block tariff increases, or even order tariff decreases, with no change to the qualityof service, or may change the conditions of access to such regulated tariffs, including changes to the price settingmechanisms as a result of political and social pressures. However, the Group cannot give any assurance that newtariff mechanisms would be put in place or that regulated tariffs would be set at a level which would allow it topreserve its short-, medium- or long-term investment capacity, while ensuring a fair return on the capital investedin its distribution, generation and supply assets. In the period from 2013-2016, electricity tariffs have decreased byapproximately 20 per cent. and natural gas tariffs have decreased by approximately 30 per cent.

Accordingly, any new regulation or any changes in the existing regulations or requirements of the Government orregulatory authorities in Lithuania or the other countries in which the Group operates, may require significantchanges in its business in ways that it cannot predict. Any new regulations or requirements that cause the Group torestructure or otherwise change its business in any way and any changes in regulated tariffs, particularly those thatmay affect the Group’s revenues from electricity or gas distribution, could have a material adverse effect on itsbusiness, results of operations and financial condition. In addition, it may fail to respond swiftly and appropriatelyto changes in applicable laws and regulations or to changes in the energy industry generally, which could have amaterial adverse effect on its business, results of operations and financial condition.

For more information on the Group’s disputes relating to the regulated tariffs, please see “Description of the Group—Legal Proceedings”.

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The Group is subject to the regulatory regime associated with selection of tertiary power reserve and strategicpower reserve service providers in Lithuania and these regimes are subject to change.

Historically, Lietuvos Energijos Gamyba, AB (“LEG”) has been the sole provider of tertiary power reserve servicesto the transmission system operator (“TSO”) and strategic power reserve services in Lithuania, see “Description ofthe Group—Principal Subsidiaries”. Tertiary reserves are intended to ensure the reliable operation of the nationalelectricity system in emergencies when there is an unexpected reduction of electricity generation or unexpectedincrease in electricity consumption. Strategic reserves are intended to provide additional security in ensuring thereliable operation of the national electricity system. The provision of tertiary and strategic power reserve servicesby LEG contributed 8 per cent. of the Group’s revenues and 12 per cent. of the Group’s adjusted EBITDA for theyear ended 31 December 2016. At the end of 2016, the Ministry of Energy and the TSO decided that providers oftertiary power reserve services would be determined by an auction process, with effect from 2017. On 28 December2016, the TSO announced that the provision of tertiary power reserve services in 2017 would be provided by theLEG through its reserve power plants in the Elektrėnai Complex. However, there is uncertainty as to whether LEGwill successfully bid for and be selected as the provider of tertiary power reserve services to the TSO in the future.Additionally, it is uncertain whether the Ministry of Energy’s mechanism for selecting the strategic power reserveservice provider in Lithuania will remain the same in the future. If LEG is unsuccessful in bidding for and is notselected as the provider of tertiary power reserve services to the TSO in the future, or is not selected as the strategicpower reserve service provider in the future, this could have a material adverse effect on the Group’s business,results of operations and financial condition.

The Group’s activities require various administrative authorisations and licences that may be difficult to obtain,maintain or renew or whose grant may be subject to conditions that may become significantly more stringent.

The Group’s generation, distribution and supply businesses require various administrative authorisations, at localand national levels, in Lithuania (see “Regulation—Electricity Sector—Licensing Regime” and “Regulation—Heating Energy Sector—Licensing Requirements” and “Regulation—Gas Sector—Licensing Regime”) and in theother countries in which it operates. Obtaining these authorisations is not routine and the conditions attached toobtaining them are subject to change and may not be predictable. As a result, the Group may incur significantexpenses in order to comply with the requirements associated with obtaining or renewing these authorisations (forexample, the cost of preparing applications for authorisations or investments associated with installing equipmentthat are required before the authorisation can be issued). Delays, extremely high costs or the suspension of theGroup’s activities due to its inability to obtain, maintain, or renew authorisations, may also have a negative impacton its business activities and profitability. For further detailed information, please see “Description of the Group—The Group’s Business—Distribution and Public Supply of Electricity and Distribution of Gas”.

In addition, the Group often invests resources prior to obtaining the necessary permits and authorisations, particularlyin connection with feasibility studies and environmental studies, but may have to cancel or withdraw from a projectif the Group is unable to obtain the necessary permits or authorisations. Licences for the distribution and supply ofelectricity and gas and the generation of electricity are granted for an indefinite period, but there is a risk that theGroup may be required to reapply for licences should the regulatory framework change in the future. On 11 October2016, the Supreme Court of Estonia withdrew the permits for the operation of two of the Group’s wind turbines inEstonia, see “Description of the Group–Legal Proceedings”. Any failure to obtain, maintain, renew or extend allthe necessary administrative authorisations and licences necessary for the operation of the Group’s business andexecution of its strategy, could have a material adverse effect on its business, results of operations and financialcondition.

The Group is subject to environmental, health and safety laws and regulations and must maintain environmental,health and safety regulatory approvals and it may be exposed to significant liabilities if it fails to comply withsuch laws or maintain such approvals.

The Group is subject to various environmental, health and safety laws and regulations governing, among otherthings: the generation, storage, handling, release, use, disposal and transportation of waste or hazardous materials;the emission and discharge of hazardous materials into the ground, air or water; the decommissioning of its facilities;and the health and safety of the public and its employees. E.U. regulators and regulators in the countries in whichthe Group operates administer these laws and regulations. The Group is also required to obtain environmental andsafety permits from various governmental authorities for its operations. Certain permits require periodic renewal orreview of their conditions as well as continuous monitoring and reporting of compliance with their conditions andthe Group cannot give any assurance that it will be able to renew such permits or that material changes to the Group’spermits requiring significant expenditures, will not be imposed. Violations of these laws, regulations or permitscould result in plant closures, fines or legal proceedings being commenced against the Group or other sanctions, in

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addition to negative publicity and significant damage to the Group’s reputation. Environmental and health and safetylaws are complex, change frequently and have tended to become more stringent over time. As a result, the Groupmay not at all times be in full compliance with all such laws and regulations. While the Group has budgeted forfuture capital and operating expenditures to comply with current environmental and health and safety laws, it ispossible that any of these laws may change or become more stringent in the future or that new laws may be adopted(for example E.U. legislation may be adopted that imposes additional capital expenditure on the Group’s gas-firedpower plants). Therefore, the Group’s costs of complying with current and future environmental and health andsafety laws and its liabilities arising from past or future releases of, or exposure to, hazardous substances, couldhave a material adverse effect on the Group’s business, results of operations and financial condition.

Political developments in the E.U. and in other countries where the Group has or plans to have a businesspresence could have a material adverse effect on its results of operations and financial condition.

Any political developments in the E.U., including any future integration or withdrawal of European countries in theE.U. or changes in the economic policy, executive authority or composition of the E.U. and its institutions, mayhave an adverse effect on the overall economic stability of the E.U. and the European countries in which the Group’sassets and operations are located. Any changes in the political or economic stability of any of the countries in whichthe Group operates, as well as any political, economic, regulatory or administrative developments in these countries,over which it has no control, could have a material adverse effect on its business, results of operations and financialcondition.

Any political or other developments affecting the integration, integrity or stability of E.U. or other energy markets,developments in the regulation of energy supply, the performance of energy markets in other Member States, andthe performance of financial markets in the E.U. and elsewhere could have a material adverse effect on the state ofthe Lithuanian economy and on the Group’s business, results of operations and financial condition.

State-aid notification risk.

The Group is subject to the E.U. state-aid rules which prohibit it from receiving any state or public aid which woulddistort or threaten to distort competition by favouring it or the production of certain goods unless the aid falls withinone of the exemptions set out in the Treaty on the Functioning of the European Union.

UAB LITGAS (“LITGAS”) is the designated supplier of gas in Lithuania through the LNG Terminal in Klaipeda.Electricity and heat producers performing regulated activities in Lithuania are obligated to purchase gas for theseactivities from LITGAS. Prior to 2016, LITGAS was paid a price for gas supplied to electricity and heat producersperforming regulated activities calculated using a formula approved by the NCC and based on a reasonable returnand compensation for costs. The Ministry of Energy notified the European Commission of these state-aid measuresand they were approved by the decision of European Commission No SA.36740 (2013/NN) dated 20 November2013. However, this decision is subject to challenge by Achema AB, see “Description of the Group—legalproceedings”. If the challenge is successful and such measures are recognised as inappropriate, LITGAS may berequired to repay some or all of the revenues received from such tariffs, which could lead to a material adverseeffect on the Group’s business, results of operation and financial condition.

In 2016, legislative amendments were introduced with the aim of reducing the burden on market participants suchas energy producers. Under the legislative amendments, LITGAS is paid the market price determined by the NCCfor gas supplied to electricity and heat producers performing regulated activities and any shortfall between this priceand LITGAS’s costs in supplying the gas is subsidised by the LNG Supplement set and approved by the NCC whichis collected from all users of natural gas (“LNG Supplement”), see “Description of the Group—PrincipalSubsidiaries” and “—Regulation—Transmission and Distribution of Gas History”. Accordingly, in 2016, the Ministryof Energy reported that it had informed the European Commission about legislative changes regarding the LNGSupplement and started the pre-notification procedure with the European Commission (the pre-notification periodbegan on 1 January 2016).

Additionally, LEG has received various PSO service fees since 2002, including for providing strategic power reserveservices since 2016. The Ministry of Energy previously determined that PSO service fees would not be consideredstate aid by the European Commission. However, in 2016 the Ministry of Energy reported that it had informed theEuropean Commission about PSO service fees and started the pre-notification procedure with the EuropeanCommission (the pre-notification period began on 1 May 2004 (when Lithuania acceded to the E.U. and becamesubject to E.U. state-aid rules)).

As a result of such notifications on LNG Supplements and PSO service fees, there is a risk that LNG Supplementsor the PSO service fees will be recognised as inappropriate by the European Commission and could be abolished(with or without the requirement for repayment of some or all revenues already received from LNG Supplements

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or PSO service fees) or amended so that the schemes will generate insufficient revenues for LITGAS’s activity asdesignated supplier of gas in Lithuania through the Klaipėda LNG Terminal or LEG’s activity as provider of strategicpower reserve services, respectively. This could potentially lead to a material adverse effect on the Group’s business,results of operations and financial condition.

The Group is subject to the risks associated with E. U. regulation of energy market mechanisms, including thecredit and cash settlement requirements for trading of commodities and financial instruments.

The Group, through its subsidiary Energijos Tiekimas UAB, trades financial and physical products on wholesaleelectricity markets. E.U. regulations, such as the E.U. Regulation on Wholesale Energy Market Integrity andTransparency (the “REMIT”), the E.U. Directive on Markets in Financial Instruments Directive (the “MIFID II”)and the E.U. Regulation on European Market Infrastructure Regulation (the “EMIR”), require compliance with thewholesale commodity trading rules, including potential cash margining requirements. These regulations havesignificantly modified financial and commodity instrument rules based on rules of the European Federation ofEnergy Traders (“EFET”) and of the International Swaps and Derivatives Association (“ISDA”). Changes to creditand cash settlement requirements require the Group to put-forward cash margining to cover mark-to-market of allthe Group’s wholesale forward sales of electricity used for hedging the electricity it has purchased for its supplyportfolio in case of power price increases and in connection with its proprietary trading activities. Due to the amountof the Group’s hedged volume and the volatility of power prices, such requirements could result in significantliquidity needs that may be difficult to cover. As a result, E.U. regulation of energy market mechanisms, includingany changes to credit and cash settlement requirements for trading of commodities and financial derivativeinstruments, could have a material adverse effect on the Group’s business, results of operations and financialcondition.

The Group is subject to public procurement regulations, which are often difficult to interpret and apply.

In many areas of the Group’s business, the Group is bound by the provisions of applicable public procurement laws.These provisions apply, inter alia, to the procedure for selecting the Group’s suppliers, construction contractors andservice providers. The provisions of these laws are often difficult to interpret and apply, and may, in particular, leadto a significant extension of the selection process and limit the Group’s freedom of decision-making. In addition, acontract concluded in breach of applicable public procurement laws may be declared null and void and penalties ofup to 10 per cent. of the contract value may be imposed on a party found to be in breach. If the Group were foundto be in breach of such a law, and the contract subject to the law was found to be null and void, the Group may haveto pay expensive penalties and there may be a resulting material adverse effect on the Group’s business, results ofoperations and financial condition.

The Group could incur unforeseen taxes, tax penalties and sanctions which could adversely affect its results ofoperations and financial condition.

Lithuania faces budget deficits and, as a result, amendments to tax regulations are being imposed on the utilitiessector, such as amendments to taxes on the use of state natural resources and pollution. Lithuania is also assessingexisting tax relief provided by the Government and excise duty rates. Any reduction or termination of corporateincome tax relief for investments could have a significant impact on the Group given the size of its investments. In2016, the Group utilised EUR 29.8 million in investment tax incentives. In relation to excise duties in Lithuania,electricity used in the generation of electricity is currently tax exempt. Any reduction or termination of excise dutiescould also have a significant impact on the Group. The imposition of any tax amendments in Lithuania, or changinginterpretations or application of tax regulations by the tax authorities, harmonisation of Lithuanian and E.U. tax lawand regulation, and the possible imposition of penalties and other sanctions due to unpaid tax liabilities may resultin additional amounts being payable by the Group, which could have a material adverse effect on its business, resultsof operations and financial condition.

Risks Relating to the Market

The Group is exposed to risks arising from its activities on the wholesale energy and financial markets.

The Group operates in the deregulated energy markets in Europe, including the Nord Pool Exchange, NasdaqCommodities Exchange and Get Baltic Exchange, through its trading activities, see “Description of the Group—Trading and Supply of Electricity and Gas—Trading of Electricity” and “Description of the Group—Trading andSupply of Electricity and Gas—Trading of Gas”. The Group plans to expand its trading and supply businesses byincreasing the volume of energy derivative products that it trades and by increasing trading with and supply to Latviaand trading with Poland. As a result, the Group is exposed to price fluctuations in the wholesale energy markets,affecting the prices at which it can purchase electricity and gas. Any such fluctuations in the wholesale energy

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markets could have a material adverse effect on the Group’s business, results of operations and financial condition.The Group is also exposed to interest rate risks by virtue of its incurrence of loans and borrowings with variableinterest rates and, in the future, the expansion of its businesses in markets other than Lithuania could also exposethe Group to currency risks.

The Group seeks to hedge these risks by entering into fixed price bilateral contracts and futures contracts oncommodity exchanges, over the counter commodity markets and swaps traded in over the counter financial markets.To the extent the Group is unable to hedge these risks, enters into hedging contracts that fail to address its exposureor incorrectly anticipate market movements, the Group may suffer significant losses which could have a materialadverse effect on its business, results of operations and financial condition.

Additionally, reduced access to the electricity wholesale markets, for example as a result of Lithuania not beingincluded in the first stage of the new “Xbid” intraday trading system which will allow power to be traded throughthe European and Scandinavian intraday markets, could restrict the ability of Energijos Tiekimas UAB to trade inintraday markets. Any reduced access to wholesale energy markets could lead to a significant drop in trading volumesand revenue which could have a material adverse effect on the Group’s business, results of operations and financialcondition.

Risks relating to the liberalisation and deregulation of electricity market in Lithuania.

The Group is exposed to significant and increasing competition in the electricity market in Lithuania. The electricitymarket is fully liberalised and, other than public supply, fully deregulated in Lithuania, see “Description of theGroup—The Group’s Business—Distribution and Public Supply of Electricity and Distribution of Gas—Publicsupply of electricity”. The liberalisation and partial deregulation of the electricity market in Lithuania has created amore competitive environment with an increased number of market participants, which has reduced the Group’smarket share in Lithuania, as well as affected its pricing. Given the ongoing development in this market, theincreasing activity of energy sellers and a growing number of customers who change their energy supplier, theGroup is exposed to the risk of losing existing customers and decreased margins achieved on sales to existingcommercial and industrial customers.

The Group cannot anticipate all of the various risks and opportunities that may arise from the ongoing deregulationof the Lithuanian energy market. The complete implementation of the deregulation process is intended to eliminateregulated retail tariffs, which is expected to further increase competition. The ongoing changes to the Lithuanianenergy market could have a material adverse effect on the Group’s business, results of operations and financialcondition.

Risks Relating to the Operations of the Group

Risks from potential participation in capital intensive projects.

The Group may participate in extensive investment projects such as the development of co-generation plants inVilnius and Kaunas, the modernisation and renewal of its distribution network, wind farm developments and mergersand acquisitions. The Group’s participation in new, capital intensive, projects may increase the Group’s exposureto operational and/or financial risk levels, which could have a material adverse effect on its business, results ofoperations and financial condition.

The Group’s operations are capital intensive because the production of energy and its distribution requires theconstruction of adequate infrastructure. Depending on the technology and type of infrastructure, from 5 per cent. toas much as 70 per cent. of the cost of construction is related to the purchase of materials, equipment and parts, theprice of which depends on many factors beyond the Group’s control. Any increase in the price of these materials,equipment or components translates into an increase in the cost of energy production and may decrease theprofitability of proposed development projects and could have a material adverse effect on the Group’s business,financial condition, prospects or results of operations.

Poor economic performance in Lithuania could have a material adverse effect on the Group’s results ofoperations and financial condition.

The Group’s revenues are particularly sensitive to the performance of the Lithuanian economy. As of 31 December2016, 98 per cent. of the Group’s property, plant and equipment were located in Lithuania and 99 per cent. of itsrevenues and other operating income for the year ended 31 December 2016 were derived from Lithuania. Changesin economic, regulatory, administrative or other policies of the Government, as well as political or economicdevelopments in Lithuania (including potential changes in Lithuania’s credit ratings) over which the Group has no

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control, could have a significant effect on the Lithuanian economy, which in turn could have a material adverseeffect on the Group’s business, results of operations and financial condition.

Poor financial performance in the Group’s distribution and generation businesses could have a material adverseeffect on the Group’s results of operations and financial condition.

The Group’s revenues are particularly sensitive to the performance of its distribution and generation businesses. Asof 31 December 2016, 51 per cent. of the Group’s revenues and 90 per cent. of its adjusted EBITDA were derivedfrom its distribution and generation businesses. Changes in natural gas demand in Lithuania and the other Balticcountries, changes in electricity prices and the regulatory framework, increases in generation and distribution costs,future developments affecting the electricity and gas infrastructure within the Baltic and Nordic regions, competitionin the markets in which the Group operates, political and economic developments affecting the Baltic and Nordicregions, E.U. legal and regulatory requirements and the reliability of its future partners for expanding the Group’sbusiness within the Baltic and Nordic regions and Poland, could have a significant effect on the financial performancein the Group’s distribution and generation businesses, which in turn could have a material adverse effect on theGroup’s business, results of operations and financial condition.

Any decreases in the prices obtained for the Group’s electricity and natural gas could have a material adverseeffect on its results of operations and financial condition.

In the ordinary course of the Group’s business, it is exposed to the risk of decreases in the prices obtained for theelectricity and natural gas it supplies to its consumers. The Group sells its electricity at prices derived from the NordPool Spot Exchange which, in turn, are affected by prices in neighbouring countries (primarily Poland, Sweden,Finland, Latvia, Estonia), imports from Russia, weather (especially wind and water), temperatures and thehydrological situation. Decreases in electricity prices in neighbouring countries, including as a result of the utilisationof more cost effective methods of generation, may limit the prices which the Group can obtain for its electricity orlimit its ability to generate electricity profitably. The Electricity price is also affected by demand, gas prices, crossborder capacities (such as the “NordBalt” interconnection and the “LitPol” interconnection) and, to a lesser extent,carbon credits traded under the E.U. emission trading scheme and coal prices. The Group sells its gas at pricesderived from gas indexes. Decreased prices of electricity and gas could have a material adverse effect on the Group’sbusiness, results of operations and financial condition.

The Group’s revenues and results of operations are subject to climatic conditions and seasonal variations thatare not within its control.

Electricity and heat consumption is seasonal and is mainly affected by climatic conditions. In the Baltic regionelectricity consumption is generally higher during the cold winter months. Electricity generation may also dependon climatic conditions, such as droughts or heat waves (which limit generation due to requirements to observecertain temperature limits for rivers downstream of facilities involved in the cooling of power plants) or speed anddirection of winds. Consequently, the income the Group receives from its supply and generation businesses reflectsthe seasonal character of the demand for electricity and may be adversely affected by significant variations in climaticconditions. The Group may need to compensate for a reduction in the availability of electricity generated byeconomical means by using other means with a higher generation cost or by accessing the wholesale markets athigher prices, which could have a material adverse effect on the Group’s business, results of operations and financialcondition.

The Group may not successfully manage the risks associated with expanding its international operations andintegrating newly acquired subsidiaries and it may face significant risks and liabilities or rating downgrades asa result of such acquisitions.

Since the Issuer was established, it has expanded its operations through mergers and acquisitions, especially inLithuania and Estonia (please see “Description of the Group—History and Development of the Group”). The Groupcontinues to evaluate investment opportunities in the future and it may expand its operations in other countries orin new markets (please see “Description of the Group—Strategy”). The Group faces many risks inherent in expandingits operations, such as unexpected changes in regulatory requirements; default by the Group’s partners; trade barriers,including import and export controls, tariffs, customs and duties; difficulties in staffing and managing foreignoperations; increased competition in fully liberalised and deregulated foreign markets; existing incumbents; lack ofbrand recognition; longer payment cycles and problems in collecting accounts receivable; fluctuations in currencyexchange rates; foreign exchange controls which restrict or prohibit repatriation of funds; technology export andimport restrictions or prohibitions; and potentially adverse tax consequences. Any failure to manage the risksassociated with expanding the Group’s operations could have a material adverse effect on the Group’s business,

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results of operations and financial condition.

In addition, although due diligence reviews are undertaken in relation to acquisitions, such reviews may not revealall existing or potential risks and liabilities and the Group cannot give any assurance that its acquisitions are not orwill not become subject to liabilities of which it is unaware. While warranties and indemnities are generally obtainedwhere practical and appropriate, the Group cannot give any assurance that it would be able to enforce its contractualor other rights against the relevant sellers or that any warranties and indemnities would be adequate to cover potentialliabilities. The acquisition of businesses or assets with risks or liabilities of which the Group was or may be unaware,or did not correctly assess or assume, or against which the Group did not obtain full legal protection, could have amaterial adverse effect on its business, results of operations and financial condition.

The Group cannot give any assurance that it will successfully integrate its previous acquisitions in an efficient andeffective manner or that it will be able to identify, consummate and integrate future acquisitions. The Group’s failureto integrate its acquisitions and to manage any of the risks and costs associated with such integration, could have amaterial adverse effect on its business, results of operations and financial condition.

In addition, any future acquisition of highly leveraged companies (and the funding of such acquisitions throughdebt finance) might result in worsening of the Group’s financial condition and therefore, lead to rating downgradesin the future.

Failures, breakdowns, planned or unplanned outages as well as natural disasters or sabotage at the Group’spower plants (including its hydropower facilities and wind farms) or in its distribution infrastructure may harmits business and reputation.

The Group’s power plants (including its gas and oil-fired heat and power plants, hydropower facilities and windfarms), distribution infrastructure and information systems controlling these facilities could be subject to failure,breakdowns, unplanned outages, capacity limitations, system loss, breaches of security or physical damage due tonatural disasters (such as storms, floods or earthquakes), sabotage, terrorism, computer viruses, fuel interruptionsand other causes. The main risk associated with the Group’s gas and oil-fired facilities is the risk of accidents ormalfunctions occurring via its electricity production units. The main risk associated with the Group’s hydropowerfacilities is the risk of damage during floods. The main risk associated with the Group’s wind farms is the risk ofbreakdowns due to unfavourable weather conditions. The Group cannot give any assurance that accidents will notoccur or that the preventative measures taken by it will be fully effective in all cases, particularly in relation toexternal events that are not within its control, such as floods and other natural disasters. Any service disruption maycause loss in electricity generation, interruption to gas and electricity supply, which may result in customerdissatisfaction and may also lead to liability for damages, the imposition of penalties and other unforeseen costsand expenses which could have a material adverse effect on the Group’s reputation, business, results of operationsand financial condition.

In addition, the Group may need to temporarily shut down some of its power plants and incur expenses in connectionwith inspections, maintenance or repair activities in addition to those that the Group currently conduct, includingsuch additional activities that the governmental authorities in the countries in which it operates may require it toconduct. Any physical damage to the Group’s facilities may be costly to repair and the Group may not have insurancecoverage for all potential losses or its insurance claims may be subject to challenge or delay. As a result, any failure,breakdown or unplanned outages at the Group’s power plants or any failure or interruption of its distributioninfrastructure could have a material adverse effect on its reputation, business, results of operations and financialcondition.

The Group’s equipment and components of its distribution network and power plants are subject to gradualdeterioration over time.

The continual operation of the Group’s distribution network and power plants, as well as natural processes, such aserosion and corrosion, have an impact on the condition of some of its equipment and components of its distributionnetwork and power plants. The impact of such operation and processes tends to increase as its plant, equipment andcomponents grow older. Certain parts of the Group’s electricity distribution system network have deteriorated dueto a prolonged lack of investments in respect of these assets. There is a risk that the quality of provided distributionservices provided in some locations may not correspond to the safety and service level requirements set out in legalacts. This in turn may lead to additional service interruptions, losses and damages causing the Group additionalunplanned repair and maintenance costs, legal disputes, as well as reallocation of resources from other investmentsprojects.

As part of the Group’s strategy it is planning to invest EUR 1.7 billion in the modernisation and renewal of itselectricity distribution network between 2015 and 2025. It has also decommissioned four units, and is currently in

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the process of decommissioning two additional units, in the Elektrėnai Complex in 2014 and 2015 and is planningto invest approximately EUR 511 million in the building of new or modernising of existing co-generation plants,with the aim of modernising its power plant portfolio. Although the Group seeks to implement new inspections andmaintenance practices, including proactively repairing or replacing equipment and components before they fail, aswell as implementing its plans to modernise its distribution network and power plant portfolio, the Group cannotgive any assurance that it will be successful in its efforts or that maintenance and investment costs will not increaseover time, which could have a material adverse effect on its business, results of operations and financial condition.

Certain of the Group’s loans have been advanced to subsidiaries of the Issuer, which means that the Noteholdersmay be effectively subordinated to other creditors of the Group.

As at 31 December 2016, the current and non-current borrowings of the Issuer’s subsidiaries amounted toEUR 429 million, or 17.7 per cent. of the Group’s total assets. This accounts for 86.8 per cent. of the Group’s totalborrowings, which amounted to EUR 494 million and which had been advanced as loans mainly to the subsidiariesof the Issuer, please see “Description of Other Indebtedness—Indebtedness at subsidiary level”. In the event of anyinsolvency of these subsidiaries, claims of their secured and unsecured creditors, including trade creditors, banksand other lenders, will have priority with respect to the assets of such subsidiaries over any claims that the Issuer orits creditors may have with respect to such assets. Additionally, if the Issuer became insolvent at the same time,claims of the Noteholders against the Issuer in respect of any Notes would only be met after the claims of all creditorsof the Issuer’s subsidiaries and may not be met in full even in circumstances where creditors of its subsidiaries arerepaid in full, see “Description of Other Indebtedness”. Secured indebtedness of the Issuer or any of its subsidiariesmay also rank effectively senior to the obligations of the Issuer under the Notes. The incurrence of additionalindebtedness by the Issuer or its subsidiaries, including secured indebtedness, may have a material adverse effecton the value of an investment in the Notes.

The Issuer’s ability to access credit and bond markets and the Issuer’s ability to raise additional financing is inpart dependent on the Issuer’s credit ratings.

As of the date of this Base Prospectus, the Issuer has been assigned a long-term senior unsecured rating of BBB+(stable outlook) by Standard & Poor’s. These ratings reflect each agency’s opinion of the Issuer’s financial strength,operating performance and ability to meet the Issuer’s debt obligations as they become due. The Issuer’s ability toaccess the capital markets and other forms of financing (or refinancing), and the costs connected with such activities,depend in part on the Issuer’s credit ratings. In the event the Issuer’s credit or debt ratings are lowered by the ratingagencies, the Issuer may not be able to raise additional indebtedness on terms similar to its existing indebtedness orat all, and its ability to access credit and bond markets and other forms of financing (or refinancing) could be limited,which could have a material adverse effect on the Group’s business, results of operations and financial condition.

Future privatisation of the Issuer may result in a credit downgrade or may affect the Group’s ability to repaydebt, which could have a material adverse effect on its results of operations and financial condition.

Lithuania, through the Ministry of Finance, is the sole shareholder of the Issuer. Although the Group does notcurrently expect the Government to privatise the Issuer, the Group cannot give any assurance that the Governmentor any future government of Lithuania will not initiate changes of relevant legislation and will not ultimately seekto undertake a partial or full privatisation of the Issuer resulting in the sale of its entire shareholding in the Issuer.Credit ratings assigned to the Issuer in the future by ratings agencies could be based in part on the opinion of therating agencies that Lithuania may potentially provide support to the Issuer in the event of financial distress. Theseratings could come under pressure, potentially leading to a downgrade, if the Issuer is fully or partially privatisedand Lithuania is no longer a controlling shareholder, which could affect the Group’s ability to make repayments onits debt or otherwise have a material adverse effect on its business, results of operations and financial condition.

The agreements that govern the Group’s long-term debt contain restrictive covenants.

The agreements that govern the Group’s long-term debt contain certain restrictive covenants, including among others“negative-pledge” clauses, “no disposal of assets” clauses and “restrictions on financial indebtedness” clauses and“net leverage ratio/net interest cover ratio” clauses, which may restrict its ability to acquire or dispose of assets orincur new debt. The Group’s failure to comply with any of these covenants could constitute an event of default,which could result in the immediate or accelerated repayment of its debt, lead to cross-default under its other creditagreements or limit or reduce its ability to implement and execute its key strategies, which could in turn have amaterial adverse effect on its business, results of operations and financial condition.

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Default or delay by any of the Group’s counterparties (which include its partners, contractors, customers,subcontractors and suppliers) as well as by financial and insurance institutions may have an impact on its resultsof operations and financial condition.

The Group undertakes significant capital expenditures related to the modernisation, renewal and construction of itsdistribution assets and energy power plants. The Group faces the risk of potential default or delay by its counterparties(which include its partners, contractors, subcontractors and suppliers), especially in cases of financial hardship orbankruptcy. Any default by the Group’s counterparties may affect the cost and completion of its projects, the qualityof its work, the supply of certain critical products or services or expose it to reputational risk, business continuityrisk and the loss of important contracts, as well as to substantial additional costs, particularly in cases where it wouldhave to pay contractual penalties, find alternative counterparties or complete work itself, which could have a materialadverse effect on the Group’s business, results of operations and financial condition.

The Group’s revenues are partly generated by sales to end-consumers or wholesale partners and state ownedcustomers across Lithuania and other Baltic markets. There is a risk that some of the Group’s key counterparties,end-consumers or suppliers could default on or dispute their contractual obligations towards us, which could havea material adverse effect on its business, results of operations and financial condition. The credit quality of theGroup’s counterparties may deteriorate during adverse economic conditions, which may threaten the results of itshedging strategy, which in turn could have a material adverse effect on its business, results of operations and financialcondition.

The Group concludes treasury operations with major Scandinavian banks and with local regional banks. Givenpotential continued economic recession in Europe and its potential impact on Europe’s financial services industry,there is a significant risk that some of the Group’s financial counterparties might default which could have a materialadverse effect on the Group’s business, results of operations and financial condition.

The Group is subject to a variety of litigation and regulatory proceedings and it cannot give any assurances asto their outcome.

In the ordinary course of the Group’s business, it is subject to numerous civil, administrative and arbitrationproceedings. See “Description of the Group—Legal Proceedings”. The Group has not recorded provisions in respectof any legal, regulatory or administrative proceedings to which it is a party or in which it may become a party. Asa result, although the Group believes it has sufficient funds to cover all amounts payable by it in connection withsuch proceedings, it cannot give any assurance of this. The Group’s failure to assess the likely outcome of anyproceedings against it could have a material adverse effect on its business, results of operations and financialcondition.

The Group also has potential liability arising from injuries to, or deaths of, workers, including, in some cases,workers employed by its contractors. The Group’s insurance for health and safety claims or the relevant workers’compensation arrangements may not be adequate to meet the costs that may arise up on any future health and safetyclaims. Any failure by the Group to adequately cover these costs may have a material adverse effect on the Group’sbusiness, results of operations and financial condition.

A strike or other labour disruption at the Group’s facilities could adversely affect its business.

A substantial number of the Group’s employees, particularly those in its electricity generation business, arerepresented by labour unions and all Group employees were covered by its collective bargaining agreements as of31 December 2016 (please see “Description of the Group—Employees”). Since the Group’s foundation, it has notexperienced any strikes or work stoppages, however, any strikes, threats of strikes, or other resistance or workstoppages in the future, particularly those affecting its facilities in Lithuania, could impair its ability to implementfurther measures to reduce costs and improve production efficiencies in furtherance of its strategy, which couldhave a material adverse effect on its business, results of operations and financial condition.

The Group’s insurance coverage may not be adequate.

The Group has property and machinery insurance for its significant assets, including the power plants in theElektrėnai Complex. However, it does not (as at the date hereof) have insurance in place for its hydro power plantsor electricity and gas distribution assets, see “Description of the Group—Insurance”. The Group cannot give anyassurance that its business will not be adversely affected by the costs of accidents or other unexpected occurrencesat its facilities for which insurance coverage is not available, has not been obtained by it or is not sufficient, whichcould have a material adverse effect on the Group’s business, results of operations and financial condition.

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The Group may not be able to hire, train or retain a sufficient number of qualified staff.

Experienced and capable personnel in the energy industry are in high demand and the Group faces significantcompetition in its principal markets to recruit such personnel. Consequently, when the Group’s experiencedemployees leave its business, it may have difficulty, and incur additional costs, replacing them. In addition, the lossof any member of the Group’s senior management team, or any change to the Supervisory Council or Board ofDirectors (including as a result of the on-going re-election process, see “Management—Supervisory Council” below),may result in a loss of organisational focus, poor execution of its operations and corporate strategy and its inabilityto identify and execute potential strategic initiatives in the future, including strategies relating to the growth of itsbusiness. The Group’s failure to hire, train or retain a sufficient number of experienced, capable and reliablepersonnel, especially senior and middle management with appropriate professional qualifications, or to recruit skilledprofessional and technical staff in pace with its growth, could have a material adverse effect on its business, resultsof operations and financial condition.

Risk surrounding the lack of integrity and the reliability of IT systems.

The complexity of the Group’s structure and its operation and the diversity of its IT systems carry a risk of a lackof coordination and cooperation between individual systems. This could limit the possibility of developing effectivestandards to create and develop a more streamlined system which, in turn, could result in inefficiencies in datahandling.

There are many changes, updates and integration features with respect to the Group’s IT systems which are beingcarried out across the Group and the broad scope of those changes carries a risk that new IT solutions may notnecessarily achieve the planned cohesion and technological and cost-related interdependence that the Group hadexpected.

There are also general concerns in the energy sector regarding the security and integrity of data which is handledthrough an energy company’s IT system. This is exacerbated by the energy sector’s increasing dependence on ITsystems and the quantity of data collected and processed by those systems which make it essential to ensure thehighest degree of reliability of those systems and the security of the data held in them.

Potential events posing a risk to the continuity of the operation of IT systems and confidentiality of data include therisk of a breakdown of the systems and cyber attacks on the systems.

There are several risks related to grid management. The electricity distribution grid is highly dependent on computer-based control systems. Any failure of the electric grid would have a significant and devastating impact on theeconomy of whole country regions. The control systems are also exposed to cyber risk.

There are risks related to power plant operations. Power plant control systems are especially vulnerable to riskssurrounding hardware disintegration and the difficulty of sourcing spare parts on the market to replace and/or upgradeaffected hardware. This is compounded by the fact that there is also a shortage of hardware and IT specialists thathave the skills to maintain the systems to the standards required.

There are also risks related to outsourcing of IT functions by the Group to third parties, which is most prevalent inrespect of IT systems that are custom developed for the Group by a single external third party according to specificneeds of the Group. In such circumstances, the Group is dependent on a single third party company which mayresult in higher development and/or support prices and development and support continuity problems if suchcompany ceases to exist or cannot honour its contractual obligations to the Group.

Finally, unreliability of certain IT systems might cause difficulties in maintaining the full functionality of invoicingsystems and result in end users not receiving invoices on time or in the correct amount.

Each of the above factors poses risks to the operations of the Group and if they were to occur, could have a materialadverse effect on the activity, results or financial condition of the Group.

The Group is subject to cyber security risks and may incur increasing costs in an effort to minimise those risks.

Security breaches could expose the Group to a risk of loss or misuse of customer information, litigation and potentialliability. Although the Group takes steps to secure management information systems, the security measures theGroup has implemented may not be effective, and the Group’s systems may be vulnerable to theft, loss, damageand interruption from a number of potential sources and events, including unauthorised access or security breaches,cyber attacks, computer viruses, power loss, or other disruptive events. The Group may not have the resources ortechnical sophistication to anticipate or prevent rapidly evolving types of cyber attacks. Attacks may be targeted atthe Group, its customers and suppliers, or others who have entrusted it with information.

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In addition, data and security breaches can also occur as a result of non-technical issues, including breaches by theGroup or by persons with whom it has commercial relationships that result in the unauthorised release of personalor confidential information. Any such cyber attack or other security issue could result in a significant loss of customerconfidence in the Group’s business which, in turn, could have a material adverse effect on the Group’s business,financial condition, prospects or results of operations and potentially entail incurring significant litigation or othercosts.

The Group may not keep pace with technological changes in the evolving energy sector.

The technologies used in the energy sector, particularly in power generation and electricity and gas distribution,constantly change and may continue to evolve rapidly in the future. Similarly techniques for generating electricityare constantly improving and becoming more complex. In order to maintain competitiveness and to expand itsbusiness, the Group must effectively adjust to changes in technology. If the Group is unable to modernise itstechnologies quickly and regularly so as to take advantage of industry trends, it could face increased pressure fromcompetitors and lose customers. The Group could also lose valuable opportunities to expand its operations in existingand new markets due to an insufficient integration of new technologies in its operations. As a result, the failure ofthe Group to respond to current and future technological changes in the energy sector in an effective and timelymanner could have a material adverse effect on the Group’s business, financial condition, prospects or results ofoperations.

Risks associated with the implementation of the Energy Efficiency Directive.

On 25 October 2012, the E.U. adopted Directive 2012/27/EU on Energy Efficiency (the “Energy EfficiencyDirective”). The Energy Efficiency Directive establishes a common framework of measures for the promotion ofenergy efficiency within the E.U. in order to ensure the achievement of the E.U. 2020 20 per cent. target on energyefficiency.

In November 2016, Lithuania adopted the requirements of the Energy Efficiency Directive by implementing theLaw on Energy Efficiency. Pursuant to this law, ESO is required to conclude an agreement with the Ministry ofEnergy pursuant to which ESO shall be obliged to, inter alia, achieve energy savings through the implementationof energy efficiency measures. This agreement is expected to be concluded by 30 June 2017. Companies in otherE.U. countries have failed to achieve the energy savings targets set by the Energy Efficiency Directive. The Law onEnergy Efficiency does not currently stipulate the amount of energy savings that need to be achieved and how theenergy efficiency measures are to be financed. However, if ESO fails to achieve the required energy savings, it mayreceive a warning or a fine of up to 5 per cent. of its gross annual income. Accordingly, the failure of ESO to achievethe required energy savings could have a material adverse effect on the Group’s business, results of operations andfinancial condition.

The Republic of Lithuania, which is the sole shareholder of the Issuer, can control the Group’s policies and maypursue decisions that reflect Government policy.

Lithuania, through the Ministry of Finance, is the sole shareholder of the Issuer, the parent company of the Group.The Republic maintains three members on the Issuer’s Supervisory Council (from the Ministry of Finance, theMinistry of Economy and one representative from the Government) and the Republic implements its rights asshareholder through the Ministry of Finance. There are three independent members on the Supervisory Council.Additionally, the Chairman of the Supervisory Council is independent and, in the case of equality of votes, has thedeciding vote. Accordingly, the Republic cannot make unilateral decisions on the Supervisory Council, please see“Description of the Group—Shareholder”. However, Lithuania, through its shareholdings, has and will continue tohave, indirectly, the power to affect the Group’s operations. As a result, certain of the Group’s decisions may reflectGovernment policy.

The interests of the Government may conflict with the Group’s objectives as a commercial enterprise and there canbe no assurance that the Government will not take any action to further its own objectives which may conflict withthe interests of the Group and/or the Noteholders. For example, the Group is subject to the Government’s dividendpolicy for state owned companies (which may limit the Group’s ability to reinvest a proportion of its profits) andthe Lithuanian energy policy, which includes the Government’s desire for it to build new CHP plants in Lithuania,both of which the Group is currently in the process of complying with. Compliance with such decisions could leadto significant capital expenditure as well as the risks inherent in building a CHP plant, including debt capacity risks,which could in turn have a material adverse effect on the Group’s ratings, business, results of operations and financialcondition. Furthermore, changes to the members of the Issuer’s Supervisory Council or Board of Directors (includingas a result of the on-going re-election process, see “Management—Supervisory Council”) are influenced by the

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Government as sole shareholder and may be made for political, rather than business, reasons and such changescould have a material adverse effect on the Group’s operations and financial condition.

Certain activities planned by the Group, including mergers and acquisitions, establishment of new legal entities bythe Issuer (but not Group subsidiaries) and reorganisations or equity injections into the Group’s principal subsidiariesrequire the approval of the Government, please see “Description of the Group—Shareholder”. Some of the Group’ssubsidiaries are also subject to additional corporate supervision under the Law on Enterprises and Plants of theStrategic Importance to National Security and Other Enterprises Important to the National Security (“Law onEnterprises of the Strategic Importance”). In respect of the Group’s subsidiaries, facilities and businesses whichare considered to be of strategic importance to national security, the Law on Enterprises of the Strategic Importance:(i) places restrictions for ownership that does not comply with the interests of national security; (ii) increases certaincompliance requirements for managers and investors and certain security measures for operations; (iii) placesrestrictions for reorganisation of directly controlled enterprises; (iv) requires state ownership to be greater than50 per cent. (and it is anticipated that new laws will require state ownership to be greater than two-thirds); and (v)may limit enforcement against such subsidiaries, facilities and businesses and the Issuer (for example as set out in(iv) above). Such powers, in particular those described in (iv) above, could affect the implementation of the Group’sstrategy which, in turn, could have a material adverse effect on the Group’s business, results of operations andfinancial condition. There is also a risk that, notwithstanding the Issuer’s waiver of immunity, Noteholders may beunable to enforce a court judgment against certain assets of the Issuer.

Elections for the Issuer's Supervisory Council and Board of Directors are due to take place in the near futurewhich may result in changes to the composition of the Supervisory Council and/or Board of Directors.

The current four year term for which all six members of the Issuer’s Supervisory Council are elected is due to expirein the near future. All members will stand for re-election for a further four year term at a General Meeting of theIssuer’s shareholders on or about 16 July 2017. It is expected that the Republic will maintain two members on theSupervisory Council (nominated by the Ministry of Finance). See “Management–Supervisory Council”. In addition,the next re-election of the members of the Board of Directors is expected to take place on or about 22 July 2017.The Shareholder has recently confirmed to the Issuer on 22 June 2017 that it will ensure that the best principles ofcorporate governance (including the corporate governance principles of the Organisation for Economic Co-operationand Development and the Nasdaq Vilnius Stock Exchange which the Issuer adheres to) will be followed in theformation of the new Supervisory Council to be elected on or about 16 July 2017 to ensure the continuity of theGroup's strategy, its results of operations and its management structure and transparency. Accordingly the Issuerbelieves that any changes to the composition of the Supervisory Board and/or the Board of Directors, following therelevant election process, will not have any material impact on the Issuer's operations or financial condition.However, the Government, as the Issuer’s sole shareholder, could influence such election processes for political,rather than business reasons which could have a material adverse effect on the Group’s operations and financialcondition. See “ –The Republic of Lithuania, which is the sole shareholder of the Issuer, can control the Group’spolicies and may pursue decisions that reflect Government policy”. In addition, any changes to the composition ofthe Issuer’s Supervisory Council and/or the Board of Directors following such elections may result in a loss oforganisational focus, poor execution of the Group’s operations and corporate strategy and its inability to identifyand execute potential strategic initiatives in the future, including strategies relating to the growth of its business.See “–The Group may not be able to hire, train or retain a sufficient number of qualified staff”.

Risks associated with restitution claims in Lithuania.

A restitution process is underway in Lithuania, which involves the return of nationalised real property to its previousowners, following the change of the political regime and the fundamental changes in the principles of registrationof real estate property in Lithuania in 1990. A significant part of the Group’s distribution assets, including itselectricity and gas distribution networks, are located on real property which was previously owned by the Republicof Lithuania and has now been returned to its previous owners as a result of the restitution process. While therestitution process provides the Group with an easement over such real property for the Group to operate itsdistribution assets, and no legislation currently requires the Group to pay compensation for the use of such easements,certain owners of previously nationalised property have recently brought actions against the Group entities claimingcompensation for the use of such easements and in some instances courts in Lithuania have found in favour of theseowners. Although the Group believes it has sufficient funds to cover all amounts which may become payable by itin connection with such claims, it cannot give any assurance of this. The Group’s failure to assess the likely outcomeof any claims against it could have a material adverse effect on its business, results of operations and financialcondition.

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RISKS RELATED TO THE STRUCTURE OF A PARTICULAR ISSUE OF NOTES

A range of Notes may be issued under the Programme. A number of these Notes may have features which containparticular risks for potential investors. Set out below is a description of the most common such features:

If the Issuer has the right to redeem any Notes at its option, this may limit the market value of the Notes concernedand an investor may not be able to reinvest the redemption proceeds in a manner which achieves a similar effectivereturn.

An optional redemption feature of Notes is likely to limit their market value. During any period when the Issuermay elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price atwhich they can be redeemed. This also may be true prior to any redemption period. The Issuer may be expected toredeem Notes when its cost of borrowing is lower than the interest rate on the Notes. At those times, an investorgenerally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interestrate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investorsshould consider reinvestment risk in light of other investments available at that time.

Zero Coupon Notes may experience price volatility in response to changes in market interest rates.

Zero Coupon Notes do not pay interest but are issued at a discount from their nominal value. Instead of periodicinterest payments, the difference between the redemption price and the issue price constitutes interest income untilmaturity and reflects the market interest rate. A holder of Zero Coupon Notes is exposed to the risk that the price ofsuch Notes falls as a result of changes in the market interest rate. Prices of Zero Coupon Notes are more volatilethan the prices of Fixed Rate Notes and are likely to respond to a greater degree to market interest rate changes thaninterest bearing notes with a similar maturity.

If the Issuer has the right to convert the interest rate on any Notes from a fixed rate to a floating rate, or viceversa, this may affect the secondary market and the market value of the Notes concerned.

Fixed/Floating Rate Notes may bear interest at a rate that converts from a fixed rate to a floating rate, or from afloating rate to a fixed rate. Where the Issuer has the right to effect such a conversion, this will affect the secondarymarket and the market value of the Notes since the Issuer may be expected to convert the rate when it is likely toproduce a lower overall cost of borrowing. If the Issuer converts from a fixed rate to a floating rate in suchcircumstances, the spread on the Fixed/Floating Rate Notes may be less favourable than then prevailing spreads oncomparable Floating Rate Notes tied to the same reference rate. In addition, the new floating rate at any time maybe lower than the rates on other Notes. If the Issuer converts from a floating rate to a fixed rate in such circumstances,the fixed rate may be lower than then prevailing rates on its Notes.

Notes which are issued at a substantial discount or premium may experience price volatility in response tochanges in market interest rates.

The market values of securities issued at a substantial discount or premium to their nominal amount tend to fluctuatemore in relation to general changes in interest rates than do prices for conventional interest-bearing securities.Generally, the longer the remaining term of the securities, the greater the price volatility as compared to conventionalinterest-bearing securities with comparable maturities.

In respect of any Notes issued as Green Bonds, there can be no assurance that such use of proceeds will besuitable for the investment criteria of an investor.

The Final Terms relating to any specific Tranche of Notes may provide that it will be the Issuer’s intention to applythe proceeds from an offer of those Notes specifically for projects and activities that promote climate-friendly andother environmental purposes (“Eligible Projects”). Prospective investors should determine for themselves therelevance of such information for the purpose of any investment in such Notes together with any other investigationsuch investor deems necessary. In particular no assurance is given by the Issuer that the use of such proceeds forany Eligible Projects will satisfy, whether in whole or in part, any present or future investor expectations orrequirements as regards any investment criteria or guidelines with which such investor or its investments are requiredto comply, whether by any present or future applicable law or regulations or by its own by-laws or other governingrules or investment portfolio mandates, in particular with regard to any direct or indirect environmental, sustainabilityor social impact of any projects or uses, the subject of or related to, any Eligible Projects. Furthermore, it should benoted that there is currently no clearly defined definition (legal, regulatory or otherwise) of, nor market consensusas to what constitutes, a “green” or “sustainable” or an equivalently-labelled project or as to what precise attributesare required for a particular project to be defined as “green” or “sustainable” or such other equivalent label nor can

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any assurance be given that such a clear definition or consensus will develop over time. Accordingly, no assuranceis or can be given to investors that any projects or uses the subject of, or related to, any Eligible Projects will meetany or all investor expectations regarding such “green”, “sustainable” or other equivalently-labelled performanceobjectives or that any adverse environmental, social and/or other impacts will not occur during the implementationof any projects or uses the subject of, or related to, any Eligible Projects.

No assurance or representation is given as to the suitability or reliability for any purpose whatsoever of any opinionor certification of any third party (whether or not solicited by the Issuer) which may be made available in connectionwith the issue of any Notes and in particular with any Eligible Projects to fulfil any environmental, sustainability,social and/or other criteria. For the avoidance of doubt, any such opinion or certification is not, nor shall be deemedto be, incorporated in and/or form part of this Base Prospectus. Any such opinion or certification is not, nor shouldbe deemed to be, a recommendation by the Issuer or any other person to buy, sell or hold any such Notes. Any suchopinion or certification is only current as of the date that opinion was initially issued. Prospective investors mustdetermine for themselves the relevance of any such opinion or certification and/or the information contained thereinand/or the provider of such opinion or certification for the purpose of any investment in such Notes. Currently, theproviders of such opinions and certifications are not subject to any specific regulatory or other regime or oversight.

In the event that any such Notes are listed or admitted to trading on any dedicated “green”, “environmental”,“sustainable” or other equivalently-labelled segment of any stock exchange or securities market (whether or notregulated), no representation or assurance is given by the Issuer or any other person that such listing or admissionsatisfies, whether in whole or in part, any present or future investor expectations or requirements as regards anyinvestment criteria or guidelines with which such investor or its investments are required to comply, whether byany present or future applicable law or regulations or by its own by-laws or other governing rules or investmentportfolio mandates, in particular with regard to any direct or indirect environmental, sustainability or social impactof any projects or uses, the subject of or related to, any Eligible Projects. Furthermore, it should be noted that thecriteria for any such listings or admission to trading may vary from one stock exchange or securities market toanother. Nor is any representation or assurance given or made by the Issuer or any other person that any such listingor admission to trading will be obtained in respect of any such Notes or, if obtained, that any such listing or admissionto trading will be maintained during the life of the Notes.

While it is the intention of the Issuer to apply the proceeds of any Notes so specified for Eligible Projects in, orsubstantially in, the manner described in this Base Prospectus, there can be no assurance that the relevant project(s)or use(s) the subject of, or related to, any Eligible Projects will be capable of being implemented in or substantiallyin such manner and/or accordance with any timing schedule and that accordingly such proceeds will be totally orpartially disbursed for such Eligible Projects. Nor can there be any assurance that such Eligible Projects will becompleted within any specified period or at all or with the results or outcome (whether or not related to theenvironment) as originally expected or anticipated by the Issuer. Any such event or failure by the Issuer will notconstitute an Event of Default under the Notes.

Any such event or failure to apply the proceeds of any issue of Notes for any Eligible Projects as aforesaid and/orwithdrawal of any such opinion or certification or any such opinion or certification attesting that the Issuer is notcomplying in whole or in part with any matters for which such opinion or certification is opining or certifying onand/or any such Notes no longer being listed or admitted to trading on any stock exchange or securities market asaforesaid may have a material adverse effect on the value of such Notes and also potentially the value of any otherNotes which are intended to finance Eligible Projects and/or result in adverse consequences for certain investorswith portfolio mandates to invest in securities to be used for a particular purpose.

RISKS RELATED TO THE NOTES GENERALLY

Set out below is a brief description of certain risks relating to the Notes generally:

Limitation periods may apply to any claims or enforcement proceedings relating to the Notes which are broughtbefore a Lithuanian court.

According to Article 55 Part 9 of the Law on Companies of the Republic of Lithuania, should the owner of any debtsecurities issued by a Lithuanian company fail to request the redemption of such debt securities within a period of3 (three) years after the due date for redemption, as established by the resolution of the company approving theissue of the relevant debt securities, then the right of the owner to request redemption shall be treated as expired.Although the Notes are governed by English law, and the prescription periods set out in Condition 14 are materiallylonger than those set out above, the application of this principle to foreign law securities is untested before theLithuanian courts, and the there remains a risk that any claims or enforcement proceedings that are not broughtwithin three years of the redemption date of the relevant Notes would not be recognised or enforced by the Lithuaniancourts.

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The conditions of the Notes contain provisions which may permit their modification without the consent of allinvestors.

The Conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters affectingtheir interests generally. These provisions permit defined majorities to bind all Noteholders including Noteholderswho did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority.The Conditions of the Notes also provide that the Agent and the Issuer may, without the consent of Noteholdersagree to the amendment of any of the provisions of the Notes in order to correct a manifest error.

Notes may be redeemed prior to their stated maturity.

Under current Lithuanian laws and regulations, interest payments under any Notes (which also includes as interest,if applicable, the difference between the redemption price and the issue price of the Notes) to individuals (non-taxresidents of Lithuania) are subject to Lithuanian withholding tax at a rate of 15 per cent. and to entities residingoutside of the EEA or in countries which do not benefit from a double tax treaty with the Republic of Lithuania aresubject to Lithuanian withholding tax at a rate of 10 per cent. – see further “Taxation”. The Issuer has undertakento pay additional amounts such that Noteholders receive the amount of interest they would have received had therebeen no such withholding. If the Issuer has or will become obliged to pay any other additional amounts as providedor referred to in Condition 12 (Taxation) as a result of any change in, or amendment to, the laws or regulations ofthe Republic of Lithuania or any political subdivision or any authority thereof or therein having power to tax, orany change in the application or official interpretation of such laws or regulations, which change or amendmentbecomes effective on or after the date of issue of the first Tranche of the Notes, the Issuer may redeem all outstandingNotes in accordance with the Conditions.

There is no active trading market for the Notes.

Notes issued under the Programme will be new securities which may not be widely distributed and for which thereis currently no active trading market (unless in the case of any particular Tranche, such Tranche is to be consolidatedwith and form a single Series with a Tranche of Notes which is already issued). If the Notes are traded after theirinitial issuance, they may trade at a discount to their initial offering price, depending upon prevailing interest rates,the market for similar securities, general economic conditions and the financial condition of the Issuer. Althoughapplications have been made for the Notes issued under the Programme to be admitted to listing on the Official Listand to trading on the Regulated Market of the Luxembourg Stock Exchange and the Nasdaq Vilnius Stock Exchange,there is no assurance that such applications will be accepted, that any particular Tranche of Notes will be so admittedor that an active trading market will develop. Accordingly, there is no assurance as to the development or liquidityof any trading market for any particular Tranche of Notes.

Because Notes in global form are held by or on behalf of Euroclear and Clearstream, Luxembourg, investorswill have to rely on their procedures for transfer and payment with the Issuer.

Notes issued under the Programme may be represented by one or more Global Notes. Such Global Notes will bedeposited with a common depositary or common safekeeper for Euroclear and Clearstream, Luxembourg. Exceptin the circumstances described in the relevant Global Note, investors will not be entitled to receive definitive Notes.Euroclear and Clearstream, Luxembourg will maintain records of the beneficial interests in the Global Notes. Whilethe Notes are represented by one or more Global Notes, investors will be able to trade their beneficial interests onlythrough Euroclear and Clearstream, Luxembourg.While the Notes are represented by one or more global Notes the Issuer will discharge its payment obligations underthe Notes by making payments to the common depositary or common safekeeper for Euroclear and Clearstream,Luxembourg for distribution to its account holders. A holder of a beneficial interest in a Global Note must rely onthe procedures of Euroclear and Clearstream, Luxembourg to receive payments under the relevant Notes. The Issuerhas no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests inthe Global Notes.Holders of beneficial interests in the Global Notes will not have a direct right to vote in respect of the relevantNotes. Instead, such holders will be permitted to act only to the extent that they are enabled by Euroclear andClearstream, Luxembourg to appoint appropriate proxies. Similarly, holders of beneficial interests in the GlobalNotes will not have a direct right under the Global Notes to take enforcement action against the Issuer in the eventof a default under the relevant Notes but will have to rely upon their rights under the Deed of Covenant.

Notes in New Global Note and New Safekeeping Structure form.

The New Global Note and New Safekeeping Structure form has been introduced to allow for the possibility of debtinstruments being issued and held in a manner which will permit them to be recognised as eligible collateral formonetary policy of the central banking system for the euro (the “Eurosystem”) and intra-day credit operations by

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the Eurosystem either upon issue or at any or all times during their life. However in any particular case suchrecognition will depend upon satisfaction of the Eurosystem eligibility criteria at the relevant time. Investors shouldmake their own assessment as to whether the Notes meet such Eurosystem eligibility criteria.

Minimum Specified Denomination and higher integral multiples.

In relation to any issue of Notes in bearer form which have a denomination consisting of a minimum SpecifiedDenomination (as defined below) plus a higher integral multiple of another smaller amount, it is possible that theNotes may be traded in amounts in excess of the minimum Specified Denomination that are not integral multiplesof such Specified Denomination. In such case a Noteholder who, as a result of trading such amount, holds a principalamount not an integral amount of such Specified Denomination may not receive a Note in definitive formcorresponding to such holding (should definitive Notes be printed) and would need to purchase a principal amountof Notes such that its holding amounts to an integral multiple of such Specified Denomination.

If an investor holds Notes which are not denominated in the investor’s home currency, he will be exposed tomovements in exchange rates adversely affecting the value of his holding. In addition, the imposition of exchangecontrols in relation to any Notes could result in an investor not receiving payments on those Notes.

The Issuer will pay principal and interest on the Notes in the Specified Currency. This presents certain risks relatingto currency conversions if an investor’s financial activities are denominated principally in a currency or currencyunit (the “Investor’s Currency”) other than the Specified Currency. These include the risk that exchange rates maysignificantly change (including changes due to devaluation of the Specified Currency or revaluation of the Investor’sCurrency) and the risk that authorities with jurisdiction over the Investor’s Currency may impose or modify exchangecontrols. An appreciation in the value of the Investor’s Currency relative to the Specified Currency would decrease(1) the Investor’s Currency-equivalent yield on the Notes, (2) the Investor’s Currency equivalent value of theprincipal payable on the Notes and (3) the Investor’s Currency equivalent market value of the Notes.

Government and monetary authorities may impose (as some have done in the past) exchange controls that couldadversely affect an applicable exchange rate or the ability of the Issuer to make payments in respect of the Notes.As a result, investors may receive less interest or principal than expected, or no interest or principal.

The value of Fixed Rate Notes may be adversely affected by movements in market interest rates.

Investment in Fixed Rate Notes involves the risk that subsequent changes in market interest rates may adverselyaffect the value of the Fixed Rate Notes.

Credit ratings assigned to the Issuer or any Notes may not reflect all the risks associated with an investment inthose Notes.

As of the date of this Base Prospectus, the Issuer has been assigned a long-term senior unsecured rating of BBB+(stable outlook) by Standard & Poor’s. Tranches of Notes to be issued under the Programme may be rated or unrated.Where a Tranche of Notes is rated, the applicable rating(s) will be specified in the relevant Final Terms. Such ratingwill not necessarily be the same as the rating(s) assigned to the Issuer or to Notes already issued. One or moreindependent credit rating agencies may also assign credit ratings to the Notes, which may not necessarily be thesame ratings as the Issuer rating described above or any rating(s) assigned to Notes already issued. Such ratingsmay not reflect the potential impact of all risks related to structure, market, additional factors discussed above, andother factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or holdsecurities and may be revised or withdrawn by the rating agency at any time.

In general, European regulated investors are restricted under the CRA Regulation from using credit ratings forregulatory purposes, unless such ratings are issued by a credit rating agency (“CRA”) established in the E.U. andregistered under the CRA Regulation (and such registration has not been withdrawn or suspended), subject totransitional provisions that apply in certain circumstances whilst the registration application is pending. Such generalrestriction will also apply in the case of credit ratings issued by non-E.U. credit rating agencies, unless the relevantcredit ratings are endorsed by an EU registered CRA or the relevant non-E.U. rating agency is certified in accordancewith the CRA Regulation (and such endorsement action or certification, as the case may be, has not been withdrawnor suspended). The list of registered and certified rating agencies published by the European Securities and MarketsAuthority (“ESMA”) on its website in accordance with the CRA Regulation is not conclusive evidence of the statusof the relevant rating agency included in such list, as there may be delays between certain supervisory measuresbeing taken against a relevant rating agency and the publication of the updated ESMA list. Certain information withrespect to the credit rating agencies and ratings is set out on the cover of this Base Prospectus.

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GENERAL DESCRIPTION OF THE PROGRAMME

The following information is derived from, and should be read in conjunction with, the full text of this BaseProspectus. You should read the whole document and not just rely on the overview information, which should beread as an introduction to this Base Prospectus. Any decision to invest in Notes issued under the Programme shouldbe based on consideration of this Base Prospectus as a whole.

Words and expressions defined in “Terms and Conditions of the Notes” below or elsewhere in this Base Prospectushave the same meanings in this overview.

Issuer: „Lietuvos energijaˮ, UAB

Programme Limit: Up to EUR 1,000,000,000 (or the equivalent in other currencies at thedate of issue) aggregate nominal amount of Notes outstanding at any onetime.

Risk Factors: Investing in Notes issued under the Programme involves certain risks.The principal risk factors that may affect the ability of the Issuer to fulfilits obligations under the Notes are discussed under “Risk Factors” below.

Arranger: BNP Paribas

Dealers: BNP Paribas and AB SEB Bankas and any other Dealer appointed fromtime to time by the Issuer either generally in respect of the Programmeor in relation to a particular Tranche of Notes.

Fiscal Agent: The Bank of New York Mellon, London Branch

Registrar: The Bank of New York Mellon SA/NV, Luxembourg Branch

Paying Agents and Transfer Agents: The Bank of New York Mellon, London Branch

Final Terms or Drawdown Prospectus: Notes issued under the Programme may be issued either (1) pursuant tothis Base Prospectus and relevant Final Terms or (2) pursuant to aDrawdown Prospectus. The terms and conditions applicable to anyparticular Tranche of Notes will be the Terms and Conditions of the Notesas completed to the extent described in the relevant Final Terms or, asthe case may be, as supplemented, amended and/or replaced to the extentdescribed in the relevant Drawdown Prospectus.

Listing and Trading: Applications have been made for Notes issued under the programme tobe admitted during the period of twelve months after the date hereof tolisting on the Official List and to trading on the Regulated Market of theLuxembourg Stock Exchange and the Nasdaq Vilnius Stock Exchange.The Programme also permits Notes to be issued on the basis that theywill not be admitted to listing, trading and/or quotation by any competentauthority, stock exchange and/or quotation system or to be admitted tolisting, trading and/or quotation by such other or further competentauthorities, stock exchanges and/or quotation systems as may be agreedwith the Issuer. Application has been made for a certificate of approvalunder Article 18 of the Prospectus Law 2005 to be issued by the CSSFto the competent authority in the Republic of Lithuania. This documentwill be published on the website of the Luxembourg Stock Exchange(www.bourse.lu).

Clearing Systems: Euroclear Bank SA/NV (“Euroclear”) and/or Clearstream Banking, S.A.(“Clearstream, Luxembourg”) and, in relation to any Tranche, suchother clearing system as may be agreed between the Issuer, the Issuingand Paying Agent and the relevant Dealer(s).

Method of Issue: The Notes will be issued in Series. Each Series may be issued in one ormore Tranches on the same or different issue dates. The specific termsof each Tranche (which will be completed, where necessary, with therelevant terms and conditions and, save in respect of the issue date, issueprice, first payment of interest and nominal amount of the Tranche, will

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be identical to the terms of other Tranches of the same Series) will becompleted in the Final Terms.

Forms of Notes: Notes may be issued in bearer form or in registered form.

Each Tranche of Bearer Notes will initially be in the form of either aTemporary Global Note or a Permanent Global Note, in each case asspecified in the relevant Final Terms. Each Global Note which is notintended to be issued in a new global note form (a “Classic GlobalNote”), as specified in the relevant Final Terms, will be deposited on oraround the relevant issue date with a depositary or a common depositaryfor Euroclear and/or Clearstream, Luxembourg and/or any other relevantclearing system and each Global Note which is intended to be issued innew global note form (a “New Global Note”), as specified in the relevantFinal Terms, will be deposited on or around the relevant issue date witha common safekeeper for Euroclear and/or Clearstream, Luxembourg.Each Temporary Global Note will be exchangeable for a PermanentGlobal Note or, if so specified in the relevant Final Terms, for DefinitiveNotes. If the TEFRA D Rules are specified in the relevant Final Termsas applicable, certification as to non-U.S. beneficial ownership will be acondition precedent to any exchange of an interest in a Temporary GlobalNote or receipt of any payment of interest in respect of a TemporaryGlobal Note. Each Permanent Global Note will be exchangeable forDefinitive Notes in accordance with its terms. Definitive Notes will, ifinterest-bearing, have Coupons attached.

Each Tranche of Notes represented by a Global Registered Note willeither be: (a) in the case of a Note which is not to be held under the newsafekeeping structure (“New Safekeeping Structure” or “NSS”),registered in the name of a common depositary (or its nominee) forEuroclear and/or Clearstream, Luxembourg and/or any other relevantclearing system and the relevant Global Registered Note will bedeposited on or about the issue date with the common depositary; or (b)in the case of a Note to be held under the New Safekeeping Structure, beregistered in the name of a common safekeeper (or its nominee) forEuroclear and/or Clearstream, Luxembourg and/or any other relevantclearing system and the relevant Global Registered Note will bedeposited on or about the issue date with the common safekeeper forEuroclear and/or Clearstream, Luxembourg.

Currencies: Subject to compliance with all relevant laws, regulations and directives,Notes may be issued in any currency agreed between the Issuer and therelevant Dealer(s).

Status: The Notes will constitute direct, general and (subject to Condition 5(Negative Pledge)) unconditional obligations of the Issuer which will atall times rank pari passu among themselves and at least pari passu withall other present and future unsecured obligations of the Issuer, save forsuch obligations as may be preferred by provisions of law that are bothmandatory and of general application.

Issue Price: Notes may be issued at any price on a fully paid basis, as specified in therelevant Final Terms. The price and amount of Notes to be issued underthe Programme will be determined by the Issuer and the relevantDealer(s) at the time of issue in accordance with prevailing marketconditions.

Maturities: Any maturity, subject, in relation to specific currencies, to compliancewith all applicable legal and/or regulatory and/or central bankrequirements.

Where Notes have a maturity of less than one year and either (a) the issueproceeds are received by the Issuer in the United Kingdom or (b) the

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activity of issuing the Notes is carried on from an establishmentmaintained by the Issuer in the United Kingdom, such Notes must: (i)have a minimum redemption value of £100,000 (or its equivalent in othercurrencies) and be issued only to persons whose ordinary activitiesinvolve them in acquiring, holding, managing or disposing of investments(as principal or agent) for the purposes of their businesses or who it isreasonable to expect will acquire, hold, manage or dispose of investments(as principal or agent) for the purposes of their businesses; or (ii) beissued in other circumstances which do not constitute a contravention ofsection 19 of the Financial Services and Markets Act 2000, as amended(the “FSMA”) by the Issuer.

Under the Luxembourg Law on Prospectuses for Securities, whichimplements Directive 2003/71/EC, prospectuses for the listing of moneymarket instruments having a maturity at issue of less than 12 months andcomplying also with the definition of securities are not subject to theapproval provisions of such law and do not need to be approved bythe CSSF.

Redemption: Notes may be redeemable at par or such other Redemption Amount asmay be specified in the relevant Final Terms.

The Final Terms issued in respect of each issue of Notes will statewhether such Notes may be redeemed prior to their stated maturity at theoption of the Issuer (either in whole or in part) and/or the Noteholders,and if so the terms applicable to such redemption.

If a Change of Control Put Option is specified in the relevant Final Terms,following the occurrence of a Change of Control, the Noteholders willbe entitled to request the Issuer to redeem or, at the Issuer’s option,procure the purchase of their Notes, as more fully set out in Condition9(f) (Redemption and Purchase – Change of Control Put Option).

If specified in the relevant Final Terms, the Issuer will have the optionto redeem the Notes, in whole or in part, at any time or from time to time,prior to their Maturity Date, at the Make-Whole Redemption Amount.See Condition 9(c) (Redemption and Purchase – Redemption at theoption of the Issuer).

Tax Redemption: Except as described in “Optional Redemption (including Make-WholeRedemption)” above, early redemption will only be permitted for taxreasons as described in Condition 9(b) (Redemption and Purchase—Redemption for tax reasons).

Interest: Notes may be interest-bearing or non-interest bearing. Interest (if any)may accrue at a fixed rate or a floating rate and the method of calculatinginterest may vary between the issue date and the maturity date of therelevant Series.

Denominations: No Notes may be issued under the Programme with a minimumdenomination of less than EUR 100,000 (or its equivalent in any othercurrency). Subject thereto, Notes will be issued in such denominationsas may be specified in the relevant Final Terms, subject to compliancewith all applicable legal and/or regulatory and/or central bankrequirements.

Negative Pledge: The Notes will have the benefit of a negative pledge as described inCondition 5 (Negative Pledge).

Cross Default: The Notes will have the benefit of a cross default provision, as describedin Condition 13(c) (Cross-default of the Issuer or Subsidiary).

Taxation: All payments of principal and interest in respect of Notes and theCoupons by or on behalf of the Issuer shall be made free and clear of,and without withholding or deduction for or on account of, any present

Optional Redemption (includingMake-Whole Redemption):

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or future taxes, duties, assessments or governmental charges of whatevernature imposed, levied, collected, withheld or assessed by or on behalfof the Republic of Lithuania or any political subdivision therein orauthority therein or thereof having power to tax, unless the withholdingor deduction of such taxes, duties, assessments or governmental chargesis required by law. In that event, the Issuer shall (subject as provided inCondition 12 (Taxation)) pay such additional amounts as will result inthe receipt by the Noteholders and the Couponholders after suchwithholding or by them had no such withholding or deduction beenrequired, all as described in “Terms and Conditions of the Notes –Taxation”.

Under current Lithuanian laws and regulations, interest payments underany Notes (which also includes as interest, if applicable, the differencebetween the redemption price and the issue price of the Notes) toindividuals (non-tax residents of Lithuania) are subject to Lithuanianwithholding tax at a rate of 15 per cent. and to entities residing outsideof the EEA or in countries which do not benefit from a double tax treatywith the Republic of Lithuania are subject to Lithuanian withholding taxat a rate of 10 per cent. – see further “Taxation”. The Issuer will payadditional amounts in respect of this withholding so that Noteholdersreceive the full amount they would have received had there been nowithholding. For so long as the Notes are held in global form, the Issuerwill pay such additional amounts on the entire principal amount of theNotes represented by such Global Note.

Rating: Notes issued under the Programme may be rated or unrated. Where anissue of Notes is rated, its rating will be specified in the applicable FinalTerms or Drawdown Prospectus. A rating is not a recommendation tobuy, sell or hold securities and may be subject to supervision, change orwithdrawal at any time from the assigning rating agency.

Governing Law: English law

Selling Restrictions: For a description of certain restrictions on offers, sales and deliveries ofNotes and on the distribution of offering material in the United States ofAmerica, the United Kingdom, the EEA (with respect to retail investors),the Republic of Lithuania and Japan, see “Subscription and Sale” below.

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PRESENTATION OF FINANCIAL INFORMATION OF THE GROUP

With the exception of certain alternative performance measures (“APMs”), the financial information as of and forthe three months ended 31 March 2017, as of and for the year ended 31 December 2016 and as of and for the yearended 31 December 2015, included in this Base Prospectus have been derived from the Group’s unaudited condensedconsolidated interim financial statements as of and for the three month period ended 31 March 2017 prepared inaccordance with the International Accounting Standard IAS 34 (the “Interim Financial Statements”), the Group’saudited stand-alone and consolidated financial statements as of and for the year ended 31 December 2016 preparedin accordance with the International Financial Reporting Standards as adopted by the E.U. (“IFRS”) (the “2016Financial Statements”), and the Group’s audited stand-alone and consolidated financial statements as of and forthe year ended 31 December 2015 prepared in accordance with IFRS (the “2015 Financial Statements”, andtogether with the 2016 Financial Statements, the “Audited Financial Statements”).

Certain amounts and percentages which appear in this Base Prospectus have been subject to rounding adjustments,and, accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures thatprecede them.

UAB PricewaterhouseCoopers (“PwC”), with its registered office in Vilnius (J.Jasinskio 16B, LT – 03163 Vilnius)audited the 2016 Financial Statements and issued an unqualified auditors’ report on the aforementioned financialstatements.

In addition, PwC audited the 2015 Financial Statements and issued a qualified auditor’s report on the aforementionedfinancial statements, see “—Qualifications to 2015 Financial Statements”.

The Interim Financial Statements have not been subject to an audit or a review by independent auditors.

Alternative Performance Measures

This section provides further information relating to APMs for the purposes of the guidelines published by theEuropean Securities and Markets Authority. Certain of the financial measures included in “Description of the Group”can be characterised as APMs and set out below are clarifications as to the meaning of such measures.

This Base Prospectus includes EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, net debt,net debt to equity, net debt to adjusted EBITDA and free cash flow figures, as set out in the following tables, whichare APMs:

EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Net Debt, Net Debt to Equity,Net Debt to Adjusted EBITDA and Free Cash Flow Figures:

As of and for the year ended 31 December

––––––––––––– –––––––––––––

2016 2015––––––––––––– –––––––––––––

(EUR in thousands, except percentages)

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225,869 139,330EBITDA Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.5% 12.7%Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254,515 215,717Adjusted EBITDA margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.1% 19.7%Net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315,826 251,786Net debt to equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.9% 19.3%Net debt to adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.24 1.17Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,445 (8,951)

EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, net debt, net debt to equity, net debt toadjusted EBITDA and free cash flow measures should not be used instead of, or considered as alternatives to, theGroup’s consolidated historical financial results based on IFRS. The non-IFRS measures relate to the reportingperiods and are not meant to be predictive of future results. EBITDA, EBITDA margin, adjusted EBITDA, adjustedEBITDA margin, net debt, net debt to equity, net debt to adjusted EBITDA and free cash flow as presented in thisBase Prospectus are not defined under, or presented in accordance with, IFRS. Management of the Group usesEBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, net debt, net debt to equity, net debt toadjusted EBITDA and free cash flow measures because the Issuer believes that these measures are commonly usedby lenders, investors and analysts. The Group’s use of the terms EBITDA, EBITDA margin, adjusted EBITDA,adjusted EBITDA margin, net debt, net debt to equity, net debt to adjusted EBITDA and free cash flow figures andits method of calculating EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, net debt, net

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debt to equity, net debt to adjusted EBITDA and free cash flow figures may vary from other companies’ use andcalculation of such terms.

These measures are presented for purposes of providing investors with a better understanding of the Issuer’s financialperformance, cash flows or financial position as they are used by the Issuer when managing its business.

EBITDA and Adjusted EBITDA

EBITDA and adjusted EBITDA should not be considered as alternatives to profit before tax as defined by IFRS orto cash flows from operating activities (or any other performance measure determined in accordance with IFRS) oras indicators of operating performance or as measures of the Group’s liquidity. In particular, EBITDA and adjustedEBITDA should not be considered as measures of discretionary cash available to the Group to invest in the growthof the Group’s businesses.

EBITDA and adjusted EBITDA have certain limitations as analytical tools, and should not be considered in isolation,or as a substitute for financial information as reported under IFRS. Investors should not place undue reliance onthis data. EBITDA in this Base Prospectus is presented, for each period, as: profit/(loss) before tax, adjusted byfinancial income and financial costs, depreciation and amortisation. Adjusted EBITDA is EBITDA further adjustedfor impairments and write offs, changes in market value of open financial derivative instruments, extraordinary andexceptional items separately identified as such by the management and temporary regulatory differences identifiedas such by the management (such as the Gazprom price reduction and temporary regulatory differences of LITGAS).For further details, see Note 38 of the 2016 Financial Statements.

No statement in this Base Prospectus is intended as a profit/EBITDA/adjusted EBITDA forecast and no statementin this Base Prospectus should be interpreted to mean that the earnings of the Group for the current or future yearswould necessarily match or exceed the historical published earnings of the Group.

The table below presents reconciliation of EBITDA and adjusted EBITDA to the net profit for the period of theGroup for the years ended 31 December 2016 and 31 December 2015:

For the year ended 31 December

––––––––––––– –––––––––––––

2016 2015––––––––––––– –––––––––––––

(EUR in thousands, except percentages)

Net profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,438 55,296Current year income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,373 2,140Deferred income tax expense/(benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,404 6,740Depreciation and amortisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78,518 74,237Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,720) (5,632)Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,856 6,549EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225,869 139,330EBITDA Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.5% 12.7%Impairments and write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,682 30,387Change in market value of open financial derivative instruments . . . . . . . . . . . . . . . . . . . (2,036) (0.0)Gas price discount provided by Gazprom(1) andtemporary regulatory differences of LITGAS(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,000 46,000Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254,515 215,717Adjusted EBITDA Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.1% 19.7%

(1) The Group received the full amount of the Gazprom discount in 2014. However, this discount was not distributed to consumers in 2014but in subsequent years, between 2015-2017. Accordingly, the adjustment in this line item has been made by management to reflect theportion of the original discount received by Gazprom which was distributed to consumers in the relevant year.

(2) Starting from 2017, the Group expects that it will make further adjustments to EBITDA for temporary regulatory differences, in particularaffecting ESO and LDT and the impact of such adjustments on the Group’s adjusted EBITDA could be significant. Adjustments to EBITDAfor temporary regulatory differences are recalculations of regulated revenue to reflect temporary differences between actual and approvedregulatory revenues, by which the Group’s future financial results would be adjusted.

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EBITDA Margin and Adjusted EBITDA Margin

EBITDA Margin consists of EBITDA divided by total revenues, expressed as a percentage.

The following table illustrates the methodology the Group uses to determine EBITDA margin for the year endedDecember 2016 and 31 December 2015:

For the year ended 31 December

––––––––––––– –––––––––––––

2016 2015––––––––––––– –––––––––––––

(EUR in thousands, except percentages)

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225,869 139,330Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,101,630 1,095,766EBITDA Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.5% 12.7%

Adjusted EBITDA margin consists of adjusted EBITDA divided by total revenues, expressed as a percentage.

The following table illustrates the methodology the Group uses to determine adjusted EBITDA margin for the yearended 31 December 2016 and 31 December 2015:

For the year ended 31 December

––––––––––––– –––––––––––––

2016 2015––––––––––––– –––––––––––––

(EUR in thousands, except percentages)

Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254,515 215,717Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,101,630 1,095,766Adjusted EBITDA Margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.1% 19.7%

Net Debt

Net debt consists of borrowings less cash and cash equivalents less short-term investments and term deposits less aportion of non-current other financial assets representing investments in debt securities.

The following table illustrates the methodology the Group uses to determine its net debt as of 31 December 2016and 31 December 2015:

As of 31 December––––––––––––– –––––––––––––

2016 2015––––––––––––– –––––––––––––

(EUR in thousands)

Non-current borrowingsBank borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364,957 277,805Current borrowingsFinance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 473Current portion of non-current borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,008 99,023Current borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,948 1,490Current portion of finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 155Letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 206Bank overdrafts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 41,531Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5Total borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 494,391 420,688Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (178,565) (164,341)Short term investments and term deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (4,561)Portion of non-current financial assets representing investment in debt securities . . . . . . — —

––––––––––––– –––––––––––––

Net Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315,826 251,786––––––––––––– –––––––––––––––––––––––––– –––––––––––––

Net Debt to Equity

Net debt to equity is the ratio of net debt to equity and is used as a measure of both indebtedness and borrowingcapacity.

Net Debt to Adjusted EBITDA

Net debt to adjusted EBITDA is the ratio of net debt to adjusted EBITDA and is used as a measure of bothindebtedness and borrowing capacity.

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Free cash flow

The Group calculates free cash flow as the sum of net cash generated from operating activities and net cash used ininvesting activities and uses it as a measure for analysing the Group’s ability to generate cash.

The following table illustrates the methodology the Group uses to determine its free cash flow for the year ended31 December 2016 and 31 December 2015:

As of 31 December––––––––––––– –––––––––––––

2016 2015––––––––––––– –––––––––––––

(EUR in thousands)

Net cash generated from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251,692 125,428Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (157,247) (134,379)Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,445 (8,951)

Qualifications to 2015 Financial Statements

PwC audited the 2016 Financial Statements and issued an audit report with no qualifications. PwC audited the 2015Financial Statements and issued an audit report with certain qualifications.

The qualified audit report on the 2015 Financial Statements contains the following statement:

“According to the Group’s accounting policy, property, plant and equipment (except for the Power Plants, distributionnetworks and related installations, gas technological equipment and constructions, information technology andtelecommunication equipment) are carried at revalued amounts, being their fair values as of the date of revaluationless subsequent accumulated depreciation and impairment losses. As explained in note 4, Group’s management hasassessed the fair values of property plant and equipment as of 31 December 2014 and accounted for the relatedrevaluation. The management did not determine the fair values of property, plant and equipment with carryingamount of EUR 1,303 million as of 31 December 2013, although impairment indicators existed as of that date.Consequently, we were unable to assess in which period the revaluation results should have been recognised, andby which amount the depreciation expense of the comparative period presented in these financial statements shouldhave been adjusted. Our audit opinions on the financial statements for the years ended 31 December 2014 and 2013were modified accordingly. Our opinion on the current period’s financial statements is therefore modified becauseof the effect of this matter on the comparability of the current period’s figures and the corresponding figures.

As of 31 December 2014, the Group’s management assessed the recoverable amount of goodwill and recognised animpairment loss. The management did not determine the recoverable amount of goodwill with carrying amount ofEUR 51.6 million as of 31 December 2013, although impairment indicators existed as of that date. Consequently,we were unable to assess in which period the impairment loss should have been recognised, and by which amountthe goodwill impairment loss of the comparative period presented in these financial statements should have beenadjusted. Our audit opinions on the financial statements for the years ended 31 December 2014 and 2013 weremodified accordingly. Our opinion on the current period’s financial statements is therefore modified because of theeffect of this matter on the comparability of the current period’s figures and the corresponding figures.

The Company accounts for its investments in subsidiaries at cost less impairment losses. As of 31 December 2014,the Company’s management assessed the recoverable amount of investments in subsidiaries and recognised animpairment loss. The management did not determine the recoverable amount of investments will with carryingamount of EUR 504.7 million as of 31 December 2013, although impairment indicators existed as of that date.Consequently, we were unable to assess in which period the impairment loss should have been recognised, and bywhich amount the impairment loss of the comparative period presented in these financial statements should havebeen adjusted. Our audit opinions on the financial statements for the years ended 31 December 2014 and 2013 weremodified accordingly. Our opinion on the current period’s financial statements is therefore modified because of theeffect of this matter on the comparability of the current period’s figures and the corresponding figures.”

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OVERVIEW OF FINANCIAL INFORMATION

The following tables set forth summary consolidated financial information of the Group as of and for the periodsindicated.

With the exception of APMs discussed in “Presentation of Financial Information of the Group”, the financialinformation as of and for the three months ended 31 March 2017 and 31 March 2016 and as of and for the yearsended 31 December 2016 and 31 December 2015 included in this Base Prospectus has been derived from the InterimFinancial Statements and the Audited Financial Statements as set out in F-4 to F-152 in this Base Prospectus.

The summary financial data in the tables below should be read together with the Interim Financial Statements andthe Audited Financial Statements, including the notes thereto. Please also see “Presentation of Financial Informationof the Group” and “Risk Factors” herein.

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The following table sets forth summary Consolidated Statements Of Profit And Loss and Other ComprehensiveIncome Data of the Group for the three months ended 31 March 2017 and 31 March 2016 and for the years ended31 December 2016 and 31 December 2015:

Consolidated Statements Of Profit And Loss And Other Comprehensive Income DataFor the three months For the year

ended 31 March (unaudited) ended 31 December2017 2016 2016 2015

–––––––––––– –––––––––––– –––––––––––– ––––––––––––

(EUR in thousands)RevenueSales revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302,825 328,052 1,070,542 1,048,021Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,795 7,047 31,088 47,745

–––––––––––– –––––––––––– –––––––––––– ––––––––––––

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309,620 335,099 1,101,630 1,095,766–––––––––––– –––––––––––– –––––––––––– –––––––––––––––––––––––– –––––––––––– –––––––––––– ––––––––––––

Operating expensesPurchases of electricity, gas for trading and

related services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (129,082) (130,852) (691,738) (761,490)Purchases of gas and heavy fuel oil . . . . . . . . . . . . . . . . . (96,615) (95,430) (35,689) (12,511)Depreciation and amortisation . . . . . . . . . . . . . . . . . . . . . (20,338) (18,871) (78,518) (74,237)Wages and salaries and related expenses . . . . . . . . . . . . . (20,185) (22,216) (86,065) (93,705)Repair and maintenance expenses . . . . . . . . . . . . . . . . . . (3,880) (4,556) (22,765) (27,196)Revaluation of property, plant and equipment

and investment property . . . . . . . . . . . . . . . . . . . . . . . . — — 336 (1,277)Impairment of property, plant and equipment . . . . . . . . . (1,086) — (566) (30,133)Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,432) (14,392) (39,274) (30,124)

–––––––––––– –––––––––––– –––––––––––– ––––––––––––

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . (280,618) (286,317) (954,279) (1,030,673)–––––––––––– –––––––––––– –––––––––––– –––––––––––––––––––––––– –––––––––––– –––––––––––– ––––––––––––

Total revenue less operating expenses . . . . . . . . . . . . . . 29,002 48,782 147,351 65,093Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 623 938 3,720 5,632Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,425) (1,975) (6,856) (6,549)

–––––––––––– –––––––––––– –––––––––––– ––––––––––––

Profit (loss) before tax . . . . . . . . . . . . . . . . . . . . . . . . . . 28,200 47,745 144,215 64,176Current year income tax (expense)/income . . . . . . . . . . . (3,500) (6,541) (13,373) (2,140)Deferred income tax (expense)/income . . . . . . . . . . . . . . (2,681) (5,924) (12,404) (6,740)

–––––––––––– –––––––––––– –––––––––––– ––––––––––––

Net profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,019 35,280 118,438 55,296Attributable to:Owners of the parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,398 32,026 108,105 49,216Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . 1,621 3,254 10,333 6,080Other comprehensive income (loss)Items that will not be reclassified to profit or lossGain (loss) on revaluation of non-current assets . . . . . . . — — 385 1,080

–––––––––––– –––––––––––– –––––––––––– ––––––––––––

Items that will be not reclassified to profit or loss, total — — 385 1,080Items that will be reclassified to profit or lossChange in fair value of available-for-sale financial assets — (14) (48) (26)

–––––––––––– –––––––––––– –––––––––––– ––––––––––––

Items that will be reclassified to profit or loss, total . . — (14) (48) (26)–––––––––––– –––––––––––– –––––––––––– ––––––––––––

Other comprehensive income (loss) . . . . . . . . . . . . . . . . — (14) 337 1,054–––––––––––– –––––––––––– –––––––––––– ––––––––––––

Total comprehensive income for the period . . . . . . . . . 22,019 35,266 118,775 56,350–––––––––––– –––––––––––– –––––––––––– –––––––––––––––––––––––– –––––––––––– –––––––––––– ––––––––––––

Attributable to:Owners of the parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,398 32,012 108,442 50,256Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . 1,621 3,254 10,333 6,094

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The following table sets forth summary consolidated statements of financial position data of the Group as of31 March 2017 and 31 December 2016:

Consolidated Statements of Financial Position DataAs of

31 March As of (unaudited) 31 December––––––––––––– –––––––––––––

2017 2016––––––––––––– –––––––––––––

EUR (in thousands)AssetsNon-current assetsIntangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,060 32,261Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,771,384 1,770,814Investment property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,007 46,207Amounts receivable after one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,334 203,582Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,871 2,620Deferred income tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,053 5,699

––––––––––––– –––––––––––––

Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,061,709 2,061,183––––––––––––– –––––––––––––––––––––––––– –––––––––––––

Current assetsInventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,873 38,117Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,753 6,967Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,341 111,884Other amounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,961 29,363Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,384 4,606Prepaid income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,083 589Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157,745 178,565

349,140 370,091Non-current assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,045 878

––––––––––––– –––––––––––––

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350,185 370,969––––––––––––– –––––––––––––

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,411,894 2,432,152––––––––––––– –––––––––––––––––––––––––– –––––––––––––

Equity and liabilitiesEquityShare capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,212,156 1,212,156Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,875 92,171Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,258) (35,952)Equity attributable to owners of the parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,288,773 1,268,375Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,783 51,172

––––––––––––– –––––––––––––

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,338,556 1,319,547––––––––––––– –––––––––––––––––––––––––– –––––––––––––

LiabilitiesNon-current liabilitiesNon-current borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345,902 364,957Finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282 316Grants and subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282,573 284,929Deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,518 40,481Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,199 3,254Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,307 52,214Other non-current amounts payable and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,542 11,780

––––––––––––– –––––––––––––

Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 739,323 757,931––––––––––––– –––––––––––––––––––––––––– –––––––––––––

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As of 31 March As of

(unaudited) 31 December––––––––––––– –––––––––––––

2017 2016––––––––––––– –––––––––––––

EUR (in thousands)Current liabilitiesCurrent portion of long-term debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,843 90,008Current borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,098 38,953Current portion of finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 157Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,146 96,118Advance amounts received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,060 27,636Income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,957 9,355Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,331 12,883Other current amounts payable and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,426 79,564

––––––––––––– –––––––––––––

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334,015 354,674Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,073,338 1,112,605

––––––––––––– –––––––––––––

Total equity and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,411,894 2,432,152––––––––––––– –––––––––––––––––––––––––– –––––––––––––

The following table sets forth summary consolidated statements of financial position data of the Group as of31 December 2016 and 31 December 2015:

As of 31 December––––––––––––– –––––––––––––

2017 2016––––––––––––– –––––––––––––

EUR (in thousands)AssetsNon-current assetsIntangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,261 21,539Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,770,814 1,631,117Investment property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,207 48,519Amounts receivable after one year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,582 244,426Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,620 3,288Deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,699 6,488Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,061,183 1,955,377Current assetsInventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,117 39,974Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,967 40,170Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,884 107,066Other amounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,363 20,977Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,606 798Prepaid income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589 5,757Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4,561Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,565 164,341 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370,091 383,644

Non-current assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 878 209––––––––––––– –––––––––––––

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 370,969 383,853––––––––––––– –––––––––––––

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,432,152 2,339,230––––––––––––– –––––––––––––––––––––––––– –––––––––––––

Equity and LiabilitiesEquityShare capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,212,156 1,212,156Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,171 91,148Retained earnings (accrued deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (35,952) (49,264)Equity attributable to owners of the parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,268,375 1,254,040Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,172 50,445

––––––––––––– –––––––––––––

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,319,547 1,304,485––––––––––––– –––––––––––––––––––––––––– –––––––––––––

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As of 31 December––––––––––––– –––––––––––––

2017 2016––––––––––––– –––––––––––––

EUR (in thousands)LiabilitiesNon-current liabilitiesNon-current borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364,957 277,805Finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 473Grants and subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284,929 296,437Deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,481 26,648Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,254 5,084Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,214 53,602Other non-current amount payable and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,780 9,033

––––––––––––– –––––––––––––

Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 757,931 669,082––––––––––––– –––––––––––––––––––––––––– –––––––––––––

Current liabilitiesCurrent portion of non-current borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,008 99,023Current borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,953 43,232Current portion of finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 155Trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,118 92,119Advance amounts received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,636 39,386Income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,355 1,314Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,883 23,333Other current amounts payable and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,564 67,101

––––––––––––– –––––––––––––

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 354,674 365,663––––––––––––– –––––––––––––

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,112,605 1,034,745––––––––––––– –––––––––––––

Total equity and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,432,152 2,339,230––––––––––––– –––––––––––––––––––––––––– –––––––––––––

The following table sets forth summary consolidated cash flow statements data of the Group for the three monthsended 31 March 2017 and 31 March 2016 and for the years ended 31 December 2016 and 31 December 2015:

Statements of Cash flow DataFor the three months For the year

ended 31 March (unaudited) ended 31 December2017 2016 2016 2015

–––––––––––– –––––––––––– –––––––––––– ––––––––––––

(EUR in thousands)Cash flows from operating activitiesNet profit for the period . . . . . . . . . . . . . . . . . . . . . . . . . . 22,019 35,280 118,438 55,296Adjustments for non-monetary expenses (income):Depreciation and amortisation expenses . . . . . . . . . . . . . 23,462 21,846 90,925 86,439Impairment of intangible assets, property,

plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,086 — 566 30,133Revaluation of investment property . . . . . . . . . . . . . . . . . — — (214) 1,407Result of revaluation of property, plant and equipment . . — — (122) (130)Revaluation of derivative financial instruments . . . . . . . . 1,492 — (2,036) —Share of profit of associates and joint ventures . . . . . . . . — 2 — 13(Gain) loss on disposal of investments in subsidiaries

and associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — (21)Impairment of financial assets (reversal of impairment) . (1,585) 586 1,019 (2,289)Income tax expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,181 12,465 25,777 8,880(Depreciation) of grants . . . . . . . . . . . . . . . . . . . . . . . . . . (3,124) (2,975) (12,407) (12,202)Increase (decrease) in provisions . . . . . . . . . . . . . . . . . . . (5,607) (8,793) (10,481) 13,819Inventory write-down expenses (income) . . . . . . . . . . . . — (20) 275 (1,077)Emission allowance revaluation expenses (income) . . . . 3,417 4,744 3,346 (370)Emission allowances utilised . . . . . . . . . . . . . . . . . . . . . . — — 1,742 2,992(Gain) loss on disposal/write-off of non current assets

(other than financial assets) . . . . . . . . . . . . . . . . . . . . . 592 13 2,285 3,710

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For the three months For the yearended 31 March (unaudited) ended 31 December

2017 2016 2016 2015–––––––––––– –––––––––––– –––––––––––– ––––––––––––

(EUR in thousands)Elimination of results of financing and investing

activities:Interest (income) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (427) (805) (2,858) (4,957)Interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,355 1,424 5,760 4,456Other finance (income) expenses . . . . . . . . . . . . . . . . . . . (126) 418 234 1,418Changes in working capital:(Increase) decrease in trade receivables and other

amounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,125 (2,410) 3,803 26,902(Increase) decrease in inventories, prepayments and

other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,116) 30,355 31,057 (16,209)Increase (decrease) in amounts payable, deferred

income and advance amounts received . . . . . . . . . . . . . (18,886) (51,243) (3,188) (60,158)Income tax (paid) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (491) (453) (2,229) (12,624)Net cash flows from (used in) operating activities . . . . 26,367 40,434 251,692 125,428

–––––––––––– –––––––––––– –––––––––––– ––––––––––––

Cash flows from investing activities(Acquisition) of property, plant and equipment and

intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41,339) (24,219) (172,946) (148,722)Disposal of property, plant and equipment and

intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,490 1,274 4,327 306Loans repaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4,504 29,201 96(Acquisition) disposal of subsidiaries . . . . . . . . . . . . . . . . — (33,158) (27,378) 125Grants received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 8 2,157 9,362Bonds redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 4,534 145Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 29 2,858 4,629Change in non-controlling interest resulting from

changes in the Group’s structure . . . . . . . . . . . . . . . . . . — — — (320)–––––––––––– –––––––––––– –––––––––––– ––––––––––––

Net cash flows from (used in) investing activities . . . . (39,765) (51,562) (157,247) (134,379)Cash flows from financing activitiesProceeds from borrowings . . . . . . . . . . . . . . . . . . . . . . . . 13,038 44,357 172,189 282,048Repayments of borrowings . . . . . . . . . . . . . . . . . . . . . . . . (24,192) (17,701) (96,689) (282,031)Finance lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . (37) (42) (155) 120Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,313) (1,611) (5,760) (4,329)Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (124) (100,537) (62,035)Increase in share capital of Kauno Kogeneraciné

Jégainé UAB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 1,317 —Acquisition of non-controlling interest . . . . . . . . . . . . . . . — — (9,055) —

–––––––––––– –––––––––––– –––––––––––– ––––––––––––

Net cash flows from (used in) financing activities . . . . (12,504) 24,879 (38,690) (66,227)–––––––––––– –––––––––––– –––––––––––– ––––––––––––

Increase (decrease) in cash and cash equivalents (including overdraft) . . . . . . . . . . . . . . . . . . . . . . . . . (25,902) 13,751 55,755 (75,178)

Cash and cash equivalents (including overdraft) at the beginning of the period . . . . . . . . . . . . . . . . . . . . 178,565 122,810 122,810 197,988

–––––––––––– –––––––––––– –––––––––––– ––––––––––––

Cash and cash equivalents (including overdraft) at the end of the period . . . . . . . . . . . . . . . . . . . . . . . . 152,663 136,561 178,565 122,810

–––––––––––– –––––––––––– –––––––––––– –––––––––––––––––––––––– –––––––––––– –––––––––––– ––––––––––––

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FINAL TERMS AND DRAWDOWN PROSPECTUSES

In this section the expression “necessary information” means, in relation to any Tranche of Notes, the informationnecessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profitsand losses and prospects of the Issuer and of the rights attaching to the Notes. In relation to the different types ofNotes which may be issued under the Programme the Issuer has included in this Base Prospectus all of the necessaryinformation except for information relating to the Notes which is not known at the date of this Base Prospectus andwhich can only be determined at the time of an individual issue of a Tranche of Notes.

Any information relating to the Notes which is not included in this Base Prospectus and which is required in orderto complete the necessary information in relation to a Tranche of Notes will be contained either in the relevant FinalTerms or in a Drawdown Prospectus.

For a Tranche of Notes which is the subject of Final Terms, those Final Terms will, for the purposes of that Trancheonly, complete this Base Prospectus and must be read in conjunction with this Base Prospectus. The terms andconditions applicable to any particular Tranche of Notes which is the subject of Final Terms are the Conditionsdescribed in the relevant Final Terms as supplemented to the extent described in the relevant Final Terms.

The terms and conditions applicable to any particular Tranche of Notes which is the subject of a DrawdownProspectus will be the Conditions as supplemented, amended and/or replaced to the extent described in the relevantDrawdown Prospectus. In the case of a Tranche of Notes which is the subject of a Drawdown Prospectus, eachreference in this Base Prospectus to information being specified or identified in the relevant Final Terms shall beread and construed as a reference to such information being specified or identified in the relevant DrawdownProspectus unless the context requires otherwise.

Each Drawdown Prospectus will be constituted either (1) by a single document containing the necessary informationrelating to the Issuer and the relevant Notes or (2) by a registration document (the “Registration Document”)containing the necessary information relating to the Issuer, a securities note (the “Securities Note”) containing thenecessary information relating to the relevant Notes and, if necessary, a summary note.

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FORMS OF THE NOTES

Bearer Notes

Each Tranche of Notes in bearer form (“Bearer Notes”) will initially be in the form of either a temporary globalnote in bearer form (the “Temporary Global Note”), without interest coupons, or a permanent global note in bearerform (the “Permanent Global Note”), without interest coupons, in each case as specified in the relevant FinalTerms. Each Temporary Global Note or, as the case may be, Permanent Global Note (each a “Global Note”) whichis not intended to be issued in new global note (“NGN”) form (each, a “CGN”), as specified in the relevant FinalTerms, will be deposited on or around the issue date of the relevant Tranche of the Notes with a depositary or acommon depositary for Euroclear Bank SA/NV as operator of the Euroclear System (“Euroclear”) and/orClearstream Banking, S.A., Luxembourg (“Clearstream, Luxembourg”) and/or any other relevant clearing systemand each Global Note which is intended to be issued in NGN form, as specified in the relevant Final Terms, will bedeposited on or around the issue date of the relevant Tranche of the Notes with a common safekeeper for Euroclearand/or Clearstream, Luxembourg.

On 13 June 2006 the European Central Bank (the “ECB”) announced that Notes in NGN form are in compliancewith the “Standards for the use of E.U. securities settlement systems in ESCB credit operations” of the centralbanking system for the euro (the “Eurosystem”), provided that certain other criteria are fulfilled. At the same timethe ECB also announced that arrangements for Notes in NGN form will be offered by Euroclear and Clearstream,Luxembourg as of 30 June 2006 and that debt securities in global bearer form issued through Euroclear andClearstream, Luxembourg after 31 December 2006 will only be eligible as collateral for Eurosystem operations ifthe NGN form is used.

Whether or not the Notes are intended to be held in a manner which would allow Eurosystem eligibility will be setout in the relevant Final Terms. Note that the designation “Yes” in the relevant Final Terms means that the Notesare intended upon issue to be deposited with one of the international central securities depositories (“ICSDs”) ascommon safekeeper and does not necessarily mean that the Notes will be recognised as eligible collateral forEurosystem monetary policy and intra-day credit operations by the Eurosystem either upon issue or at any or alltimes during their life. Such recognition will depend upon satisfaction of the Eurosystem eligibility criteria. Wherethe designation is specified as “No” in the relevant Final Terms, should the Eurosystem eligibility criteria be amendedin the future such that the Notes are capable of meeting them, the Notes may then be deposited with one of theICSDs as common safekeeper. Note that this does not necessarily mean that the Notes will then be recognised aseligible collateral for Eurosystem monetary policy and intra-day credit operations by the Eurosystem at any timeduring their life. Such recognition will depend upon the ECB being satisfied that Eurosystem eligibility criteriahave been met.

In the case of each Tranche of Bearer Notes, the relevant Final Terms will also specify whether United StatesTreasury Regulation §1.163-5(c)(2)(i)(C) (the “TEFRA C Rules”) or United States Treasury Regulation §1.1635(c)(2)(i)(D) (the “TEFRA D Rules”) are applicable in relation to the Notes or, if the Notes do not have a maturityof more than 365 days, that neither the TEFRA C Rules nor the TEFRA D Rules are applicable.

Temporary Global Note exchangeable for Permanent Global Note

If the relevant Final Terms specifies the form of Notes as being “Temporary Global Note exchangeable for aPermanent Global Note”, then the Notes will initially be in the form of a Temporary Global Note which will beexchangeable, in whole or in part, for interests in a Permanent Global Note, without interest coupons, not earlierthan 40 days after the issue date of the relevant Tranche of the Notes upon certification as to non-U.S. beneficialownership. No payments will be made under the Temporary Global Note unless exchange for interests in thePermanent Global Note is improperly withheld or refused. In addition, interest payments in respect of the Notescannot be collected without such certification of non-U.S. beneficial ownership.

Whenever any interest in the Temporary Global Note is to be exchanged for an interest in a Permanent Global Note,the Issuer shall procure (in the case of first exchange) the delivery of a Permanent Global Note to the bearer of theTemporary Global Note or (in the case of any subsequent exchange) an increase in the principal amount of thePermanent Global Note in accordance with its terms against:

(i) presentation and (in the case of final exchange) presentation and surrender of the Temporary Global Note to orto the order of the Fiscal Agent; and

(ii) receipt by the Fiscal Agent of a certificate or certificates of non-U.S. beneficial ownership.

The principal amount of Notes represented by the Permanent Global Note shall be equal to the aggregate of theprincipal amounts specified in the certificates of non-U.S. beneficial ownership provided, however, that in no

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circumstances shall the principal amount of Notes represented by the Permanent Global Note exceed the initialprincipal amount of Notes represented by the Temporary Global Note.

If:

(a) the Permanent Global Note has not been delivered or the principal amount thereof increased by 5.00 p.m.(London time) on the seventh day after the bearer of the Temporary Global Note has requested exchange of aninterest in the Temporary Global Note for an interest in a Permanent Global Note; or

(b) the Temporary Global Note (or any part thereof) has become due and payable in accordance with the Termsand Conditions of the Notes or the date for final redemption of the Temporary Global Note has occurred and,in either case, payment in full of the amount of principal falling due with all accrued interest thereon has notbeen made to the bearer of the Temporary Global Note in accordance with the terms of the Temporary GlobalNote on the due date for payment,

then the Temporary Global Note (including the obligation to deliver a Permanent Global Note) will become void at5.00 p.m. (London time) on such seventh day (in the case of (a) above) or at 5.00 p.m. (London time) on such duedate (in the case of (b) above) and the bearer of the Temporary Global Note will have no further rights thereunder(but without prejudice to the rights which the bearer of the Temporary Global Note or others may have under theDeed of Covenant).

The Permanent Global Note will become exchangeable, in whole but not in part only and at the request of the bearerof the Permanent Global Note, for Bearer Notes in definitive form (“Definitive Notes”):

(a) on the expiry of such period of notice as may be specified in the Final Terms; or

(b) at any time, if so specified in the Final Terms; or

(c) if the Final Terms specifies “in the limited circumstances described in the Permanent Global Note”, then ifeither of the following events occurs:

(i) Euroclear or Clearstream, Luxembourg or any other relevant clearing system is closed for business for acontinuous period of 14 days (other than by reason of legal holidays) or announces an intention permanentlyto cease business; or

(ii) any of the circumstances described in Condition 13 (Events of Default) occurs.

Whenever the Permanent Global Note is to be exchanged for Definitive Notes, the Issuer shall procure the promptdelivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons and Talonsattached (if so specified in the Final Terms), in an aggregate principal amount equal to the principal amount of Notesrepresented by the Permanent Global Note to the bearer of the Permanent Global Note against the surrender of thePermanent Global Note to or to the order of the Fiscal Agent within 30 days of the bearer requesting such exchange.

If:

(a) Definitive Notes have not been duly delivered by 5.00 p.m. (London time) on the thirtieth day after the bearerhas requested exchange of the Permanent Global Note for Definitive Notes; or

(b) the Permanent Global Note was originally issued in exchange for part only of a Temporary Global Noterepresenting the Notes and such Temporary Global Note becomes void in accordance with its terms; or

(c) the Permanent Global Note (or any part thereof) has become due and payable in accordance with the Termsand Conditions of the Notes or the date for final redemption of the Permanent Global Note has occurred and,in either case, payment in full of the amount of principal falling due with all accrued interest thereon has notbeen made to the bearer in accordance with the terms of the Permanent Global Note on the due date for payment,

then the Permanent Global Note (including the obligation to deliver Definitive Notes) will become void at 5.00 p.m.(London time) on such thirtieth day (in the case of (a) above) or at 5.00 p.m. (London time) on the date on whichsuch Temporary Global Note becomes void (in the case of (b) above) or at 5.00 p.m. (London time) on such duedate ((c) above) and the bearer of the Permanent Global Note will have no further rights thereunder (but withoutprejudice to the rights which the bearer of the Permanent Global Note or others may have under the Deed ofCovenant).

Temporary Global Note exchangeable for Definitive Notes

If the relevant Final Terms specifies the form of Notes as being “Temporary Global Note exchangeable for DefinitiveNotes” and also specifies that the TEFRA C Rules are applicable or that neither the TEFRA C Rules or the TEFRAD Rules are applicable, then the Notes will initially be in the form of a Temporary Global Note which will be

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exchangeable, in whole but not in part, for Definitive Notes not earlier than 40 days after the issue date of therelevant Tranche of the Notes.

If the relevant Final Terms specifies the form of Notes as being “Temporary Global Note exchangeable for DefinitiveNotes” and also specifies that the TEFRA D Rules are applicable, then the Notes will initially be in the form of aTemporary Global Note which will be exchangeable, in whole or in part, for Definitive Notes not earlier than 40 daysafter the issue date of the relevant Tranche of the Notes upon certification as to non-U.S. beneficial ownership.Interest payments in respect of the Notes cannot be collected without such certification of non-U.S. beneficialownership.

Whenever the Temporary Global Note is to be exchanged for Definitive Notes, the Issuer shall procure the promptdelivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons and Talonsattached (if so specified in the relevant Final Terms), in an aggregate principal amount equal to the principal amountof the Temporary Global Note to the bearer of the Temporary Global Note against the surrender of the TemporaryGlobal Note to or to the order of the Fiscal Agent within 30 days of the bearer requesting such exchange.

If:

(a) Definitive Notes have not been duly delivered by 5.00 p.m. (London time) on the thirtieth day after the bearerhas requested exchange of the Temporary Global Note for Definitive Notes; or

(b) the Temporary Global Note (or any part thereof) has become due and payable in accordance with the Termsand Conditions of the Notes or the date for final redemption of the Temporary Global Note has occurred and,in either case, payment in full of the amount of principal falling due with all accrued interest thereon has notbeen made to the bearer in accordance with the terms of the Temporary Global Note on the due date for payment,

then the Temporary Global Note (including the obligation to deliver Definitive Notes) will become void at 5.00 p.m.(London time) on such thirtieth day (in the case of (a) above) or at 5.00 p.m. (London time) on such due date (in thecase of (b) above) and the bearer of the Temporary Global Note will have no further rights thereunder (but withoutprejudice to the rights which the bearer of the Temporary Global Note or others may have under the Deed ofCovenant).

Permanent Global Note exchangeable for Definitive Notes

If the relevant Final Terms specifies the form of Notes as being “Permanent Global Note exchangeable for DefinitiveNotes”, then the Notes will initially be in the form of a Permanent Global Note which will be exchangeable inwhole, but not in part, for Definitive Notes:

(a) on the expiry of such period of notice as may be specified in the relevant Final Terms; or

(b) at any time, if so specified in the relevant Final Terms; or

(c) if the relevant Final Terms specifies “in the limited circumstances described in the Permanent Global Note”,then if either of the following events occurs:

(i) Euroclear or Clearstream, Luxembourg or any other relevant clearing system is closed for business for acontinuous period of 14 days (other than by reason of legal holidays) or announces an intention permanentlyto cease business; or

(ii) any of the circumstances described in Condition 13 (Events of Default) occurs.

Whenever the Permanent Global Note is to be exchanged for Definitive Notes, the Issuer shall procure the promptdelivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons and Talonsattached (if so specified in the Final Terms), in an aggregate principal amount equal to the principal amount of Notesrepresented by the Permanent Global Note to the bearer of the Permanent Global Note against the surrender of thePermanent Global Note to or to the order of the Fiscal Agent within 30 days of the bearer requesting such exchange.

If:

(a) Definitive Notes have not been duly delivered by 5.00 p.m. (London time) on the thirtieth day after the bearerhas requested exchange of the Permanent Global Note for Definitive Notes; or

(b) the Permanent Global Note (or any part thereof) has become due and payable in accordance with the Termsand Conditions of the Notes or the date for final redemption of the Permanent Global Note has occurred and,in either case, payment in full of the amount of principal falling due with all accrued interest thereon has notbeen made to the bearer in accordance with the terms of the Permanent Global Note on the due date for payment,

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then the Permanent Global Note (including the obligation to deliver Definitive Notes) will become void at 5.00 p.m.(London time) on such thirtieth day (in the case of (a) above) or at 5.00 p.m. (London time) on such due date ((b)above) and the bearer of the Permanent Global Note will have no further rights thereunder (but without prejudiceto the rights which the bearer of the Permanent Global Note or others may have under the Deed of Covenant).

Rights under Deed of Covenant

Under the Deed of Covenant, persons shown in the records of Euroclear and/or Clearstream, Luxembourg and/orany other relevant clearing system as being entitled to an interest in a Temporary Global Note or a Permanent GlobalNote which becomes void will acquire directly against the Issuer all those rights to which they would have beenentitled if, immediately before the Temporary Global Note or Permanent Global Note became void, they had beenthe holders of Definitive Notes in an aggregate principal amount equal to the principal amount of Notes they wereshown as holding in the records of Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearingsystem.

Terms and Conditions applicable to the Notes

The terms and conditions applicable to any Definitive Note will be endorsed on that Note and will consist of theterms and conditions set out under “Terms and Conditions of the Notes” below and the provisions of the relevantFinal Terms which supplement, amend and/or replace those terms and conditions.

The terms and conditions applicable to any Note in global form will differ from those terms and conditions whichwould apply to the Note were it in definitive form to the extent described under “Overview of Provisions Relatingto the Notes while in Global Form” below.

Legend Concerning United States Persons

In the case of any Tranche of Bearer Notes having a maturity of more than 365 days, the Notes in global form, theNotes in definitive form and any Coupons and Talons appertaining thereto will bear a legend to the following effect:

“Any United States person who holds this obligation will be subject to limitations under the United Statesincome tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the InternalRevenue Code.”

Registered Notes

Each Tranche of Notes in registered form (“Registered Notes”) will be represented by either individual NoteCertificates in registered form (“Individual Note Certificates”) or a global Note in registered form (a “GlobalRegistered Note”), in each case as specified in the relevant Final Terms.

In a press release dated 22 October 2008, “Evolution of the custody arrangement for international debt securitiesand their eligibility in Eurosystem credit operations”, the ECB announced that it has assessed the new holdingstructure and custody arrangements for registered notes which the ICSDs had designed in cooperation with marketparticipants and that Notes to be held under the new structure (the “New Safekeeping Structure” or “NSS”) wouldbe in compliance with the “Standards for the use of E.U. securities settlement systems in ESCB credit operations”of the central banking system for the euro (the “Eurosystem”), subject to the conclusion of the necessary legal andcontractual arrangements. The press release also stated that the new arrangements for Notes to be held in NSS formwill be offered by Euroclear and Clearstream, Luxembourg as of 30 June 2010 and that registered debt securities inglobal registered form issued through Euroclear and Clearstream, Luxembourg after 30 September 2010 will onlybe eligible as collateral in Eurosystem operations if the New Safekeeping Structure is used.

Each Note represented by a Global Registered Note will either be: (a) in the case of a Note which is not to be heldunder the NSS, registered in the name of a common depositary (or its nominee) for Euroclear and/or Clearstream,Luxembourg and/or any other relevant clearing system and the relevant Global Registered Note will be depositedon or about the issue date with the common depositary; or (b) in the case of a Note to be held under the NewSafekeeping Structure, be registered in the name of a common safekeeper (or its nominee) for Euroclear and/orClearstream, Luxembourg and the relevant Global Registered Note will be deposited on or about the issue date withthe common safekeeper for Euroclear and/or Clearstream, Luxembourg.

Whether or not the Notes are intended to be held in a manner which would allow Eurosystem eligibility will be setout in the relevant Final Terms. Note that the designation “Yes” in the relevant Final Terms means that the Notesare intended upon issue to be deposited with one of the ICSDs as common safekeeper and registered in the name ofa nominee of one of the ICSDs acting as common safekeeper, and does not necessarily mean that the Notes will berecognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations by the Eurosystem

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either upon issue or at any or all times during their life. Such recognition will depend upon satisfaction of theEurosystem eligibility criteria. Where the designation is specified as “No” in the relevant Final Terms, should theEurosystem eligibility criteria be amended in the future such that the Notes are capable of meeting them, the Notesmay then be deposited with one of the ICSDs as common safekeeper and registered in the name of a nominee ofone of the ICSDs acting as common safekeeper. Note that this does not necessarily mean that the Notes will thenbe recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations by the Eurosystemat any time during their life. Such recognition will depend upon the ECB being satisfied that Eurosystem eligibilitycriteria have been met.

If the relevant Final Terms specifies the form of Notes as being “Individual Note Certificates”, then the Notes willat all times be represented by Individual Note Certificates issued to each Noteholder in respect of their respectiveholdings.

Global Registered Note Exchangeable for Individual Note Certificates

If the relevant Final Terms specifies the form of Notes as being “Global Registered Note exchangeable for IndividualNote Certificates”, then the Notes will initially be represented by one or more Global Registered Notes each ofwhich will be exchangeable in whole, but not in part, for Individual Note Certificates:

(i) on the expiry of such period of notice as may be specified in the relevant Final Terms; or

(ii) at any time, if so specified in the relevant Final Terms; or

(iii) if the relevant Final Terms specifies “in the limited circumstances described in the Global Registered Note”,then:

(a) if Euroclear, Clearstream, Luxembourg or any other relevant clearing system is closed for business for acontinuous period of 14 days (other than by reason of legal holidays) or announces an intention permanentlyto cease business; and

(b) in any case, if any of the circumstances described in Condition 13 (Events of Default) occurs.

Whenever a Global Registered Note is to be exchanged for Individual Note Certificates, the Issuer shall procurethat Individual Note Certificates will be issued in an aggregate principal amount equal to the principal amount ofthe Global Registered Note within five business days of the delivery, by or on behalf of the registered holder of theGlobal Registered Note to the Registrar of such information as is required to complete and deliver such IndividualNote Certificates against the surrender of the Global Registered Note at the specified office of the Registrar.

Such exchange will be effected in accordance with the provisions of the Agency Agreement and the regulationsconcerning the transfer and registration of Notes scheduled to the Agency Agreement and, in particular, shall beeffected without charge to any holder, but against such indemnity as the Registrar may require in respect of any taxor other duty of whatsoever nature which may be levied or imposed in connection with such exchange.

Terms and Conditions applicable to the Notes

The terms and conditions applicable to any Individual Note Certificate will be endorsed on that Individual NoteCertificate and will consist of the terms and conditions set out under “Terms and Conditions of the Notes” belowand the provisions of the relevant Final Terms which complete those terms and conditions.

The terms and conditions applicable to any Global Registered Note will differ from those terms and conditionswhich would apply to the Note were it in definitive form to the extent described under “Overview of ProvisionsRelating to the Notes while in Global Form” below.

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OVERVIEW OF PROVISIONS RELATING TO THE NOTES WHILE IN GLOBAL FORM

Clearing System Accountholders

In relation to any Tranche of Notes represented by a Global Note in bearer form, references in the Terms andConditions of the Notes to “Noteholder” are references to the bearer of the relevant Global Note which, for so longas the Global Note is held by a depositary or a common depositary, in the case of a CGN, or a common safekeeper,in the case of an NGN for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system, willbe that depositary or common depositary or, as the case may be, common safekeeper.

In relation to any Tranche of Notes represented by one or more Global Registered Notes, references in the Termsand Conditions of the Notes to “Noteholder” are references to the person in whose name the relevant GlobalRegistered Note is for the time being registered in the Register which for so long as the Global Registered Note isheld by or on behalf of a depositary or a common depositary or a common safekeeper for Euroclear and/orClearstream, Luxembourg and/or any other relevant clearing system, will be that depositary or common depositaryor common safekeeper or a nominee for that depositary or common depositary or common safekeeper.

Each of the persons shown in the records of Euroclear, Clearstream, Luxembourg and/or any other relevant clearingsystem as being entitled to an interest in a Global Note or a Global Registered Note (each an “Accountholder”)must look solely to Euroclear, Clearstream, Luxembourg and/or such other relevant clearing system (as the casemay be) for such Accountholder’s share of each payment made by the Issuer to the holder of such Global Note orGlobal Registered Note and in relation to all other rights arising under such Global Note or Global Registered Note.The extent to which, and the manner in which, Accountholders may exercise any rights arising under a Global Noteor Global Registered Note will be determined by the respective rules and procedures of Euroclear and Clearstream,Luxembourg and any other relevant clearing system from time to time. For so long as the relevant Notes arerepresented by a Global Note or Global Registered Note, Accountholders shall have no claim directly against theIssuer in respect of payments due under the Notes and such obligations of the Issuer will be discharged by paymentto the holder of such Global Note or Global Registered Note.

Transfers of Interests in Global Notes and Global Registered Notes

Transfers of interests in Global Notes and Global Registered Notes within Euroclear and Clearstream, Luxembourgor any other relevant clearing system will be in accordance with their respective rules and operating procedures.None of the Issuer, the Registrar, the Dealers or the Agents will have any responsibility or liability for any aspectof the records of any Euroclear and Clearstream, Luxembourg or any other relevant clearing system or any of theirrespective participants relating to payments made on account of beneficial ownership interests in a Global Note orGlobal Registered Note or for maintaining, supervising or reviewing any of the records of Euroclear and Clearstream,Luxembourg or any other relevant clearing system or the records of their respective participants relating to suchbeneficial ownership interests.

For a further description of restrictions on the transfer of Notes, see “Subscription and Sale”.

Conditions Applicable to Global Notes

Each Global Note and Global Registered Note will contain provisions which modify the Terms and Conditions ofthe Notes as they apply to the Global Note or Global Registered Note. The following is a summary of certain of thoseprovisions:

Payments: All payments in respect of the Global Note or Global Registered Note which, according to the Termsand Conditions of the Notes, require presentation and/or surrender of a Note, Note Certificate or Coupon will bemade against presentation and (in the case of payment of principal in full with all interest accrued thereon) surrenderof the Global Note or Global Registered Note to or to the order of any Paying Agent and will be effective to satisfyand discharge the corresponding liabilities of the Issuer in respect of the Notes. On each occasion on which a paymentof principal or interest is made in respect of the Global Note, the Issuer shall procure that in respect of a CGN thepayment is noted in a schedule thereto and in respect of an NGN the payment is entered pro rata in the records ofEuroclear and Clearstream, Luxembourg.

Payment Business Day: in the case of a Global Note or a Global Registered Note, shall be: if the currency of paymentis euro, any day which is a TARGET Settlement Day and a day on which dealings in foreign currencies may becarried on in each (if any) Additional Financial Centre; or, if the currency of payment is not euro, any day which isa day on which dealings in foreign currencies may be carried on in the Principal Financial Centre of the currencyof payment and in each (if any) Additional Financial Centre.

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Payment Record Date: Each payment in respect of a Global Registered Note will be made to the person shown asthe Holder in the Register at the close of business (in the relevant clearing system) on the Clearing System BusinessDay before the due date for such payment (the “Record Date”) where “Clearing System Business Day” means aday on which each clearing system for which the Global Registered Note is being held is open for business.

Exercise of put option: In order to exercise the option contained in Condition 9(e) (Redemption at the option ofNoteholders) the bearer of a Permanent Global Note or the holder of a Global Registered Note must, within theperiod specified in the Conditions for the deposit of the relevant Note and put notice, give written notice of suchexercise to the Principal Paying Agent specifying the principal amount of Notes in respect of which such option isbeing exercised. Any such notice will be irrevocable and may not be withdrawn.

Partial exercise of call option: In connection with an exercise of the option contained in Condition 9(c) (Redemptionat the option of the Issuer) in relation to some only of the Notes, the Permanent Global Note or Global RegisteredNote may be redeemed in part in the principal amount specified by the Issuer in accordance with the Conditionsand the Notes to be redeemed will not be selected as provided in the Conditions but in accordance with the rulesand procedures of Euroclear and/or Clearstream, Luxembourg (to be reflected in the records of Euroclear and/orClearstream, Luxembourg as either a pool factor or a reduction in principal amount, at their discretion).

Notices: Notwithstanding Condition 19 (Notices), while all the Notes are represented by a Permanent Global Note(or by a Permanent Global Note and/or a Temporary Global Note) or a Global Registered Note and the PermanentGlobal Note is (or the Permanent Global Note and/or the Temporary Global Note are), or the Global RegisteredNote is, deposited with a depositary or a common depositary for Euroclear and/or Clearstream, Luxembourg and/orany other relevant clearing system or a common safekeeper, notices to Noteholders may be given by delivery of therelevant notice to Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system and, in anycase, such notices shall be deemed to have been given to the Noteholders in accordance with Condition 19 (Notices)on the date of delivery to Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearing systemexcept that so long as the Notes are listed on the Luxembourg Stock Exchange’s regulated market and the rules ofthat exchange so require, notices shall also be published either on the website of the Luxembourg Stock Exchange(www.bourse.lu) or in a leading newspaper having general circulation in Luxembourg (which is expected to be theLuxemburger Wort). Whilst any of the Notes held by a Noteholder are represented by a Global Note, notices to begiven by such Noteholder may be given by such Noteholder to the Fiscal Agent or Registrar (as applicable) throughEuroclear and/or Clearstream, Luxembourg and/or any other relevant clearing system, and otherwise in such manneras the Fiscal Agent or the Registrar, as the case may be, and/or Euroclear and/or Clearstream, Luxembourg and/orany other relevant clearing system, as the case may be, may approve for this purpose.

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TERMS AND CONDITIONS OF THE NOTES

The following is the text of the terms and conditions which, as completed by the relevant Final Terms, will beendorsed on each Note in definitive form issued under the Programme. The terms and conditions applicable to anyNote in global form will differ from those terms and conditions which would apply to the Note were it in definitiveform to the extent described under “Overview of Provisions Relating to the Notes while in Global Form” above.

1. Introduction

(a) Programme: „Lietuvos energija“, UAB (the “Issuer”) has established a Euro Medium Term Note Programme(the “Programme”) for the issuance of up to EUR 1,000,000,000 (or the equivalent in other currencies at thedate of issue) in aggregate principal amount of notes (the “Notes”).

(b) Final Terms: Notes issued under the Programme are issued in series (each a “Series”) and each Series maycomprise one or more tranches (each a “Tranche”) of Notes. Each Tranche is the subject of final terms(the “Final Terms”) which complete these terms and conditions (the “Conditions”). The terms and conditionsapplicable to any particular Tranche of Notes are these Conditions as completed by the relevant Final Terms.In the event of any inconsistency between these Conditions and the relevant Final Terms, the relevant FinalTerms shall prevail.

(c) Agency Agreement: The Notes are the subject of an issue and paying agency agreement dated 27 June 2017(the “Agency Agreement”) between the Issuer, The Bank of New York Mellon, London Branch as fiscal agent(the “Fiscal Agent”, which expression includes any successor fiscal agent appointed from time to time inconnection with the Notes), The Bank of New York Mellon SA/NV, Luxembourg Branch as registrar(the “Registrar”, which expression includes any successor registrar appointed from time to time in connectionwith the Notes), the paying agents named therein (together with the Fiscal Agent, the “Paying Agents”, whichexpression includes any successor or additional paying agents appointed from time to time in connection withthe Notes) and the transfer agents named therein (together with the Registrar, the “Transfer Agents”,which expression includes any successor or additional transfer agents appointed from time to time in connectionwith the Notes). In these Conditions references to the “Agents” are to the Paying Agents and the Transfer Agentsand any reference to an “Agent” is to any one of them.

(d) Deed of Covenant: The Notes may be issued in bearer form (“Bearer Notes”), or in registered form (“RegisteredNotes”). Registered Notes are constituted by a deed of covenant dated 27 June 2017 (the “Deed of Covenant”)entered into by the Issuer.

(e) The Notes: All subsequent references in these Conditions to “Notes” are to the Notes which are the subject ofthe relevant Final Terms. Copies of the relevant Final Terms are available for viewing, and copies may beobtained from, the registered office of the Issuer, Žvejų g. 14, LT-09310 Vilnius, the Republic of Lithuania andthe Issuer’s website www.le.lt. Copies of the relevant Final Terms will also be published on the website of theLuxembourg Stock Exchange (www.bourse.lu).

(f) Summaries: Certain provisions of these Conditions are summaries of the Agency Agreement and the Deed ofCovenant and are subject to their detailed provisions. Noteholders and the holders of the related interest coupons,if any, (the “Couponholders” and the “Coupons”, respectively) are bound by, and are deemed to have noticeof, all the provisions of the Agency Agreement and the Deed of Covenant applicable to them. Copies of theAgency Agreement and the Deed of Covenant are available for inspection by Noteholders during normalbusiness hours at the Specified Offices of each of the Agents, the initial Specified Offices of which are set outbelow.

2. Interpretation

(a) Definitions: In these Conditions the following expressions have the following meanings:

“Accrual Yield” has the meaning given in the relevant Final Terms;

“Additional Business Centre(s)” means the city or cities specified as such in the relevant Final Terms;

“Additional Financial Centre(s)” means the city or cities specified as such in the relevant Final Terms;

“Benchmark Security” has the meaning given it in Condition 9(c) (Redemption at the option of the Issuer);

“Business Day” means:

(a) in relation to any sum payable in euro, a TARGET Settlement Day and a day on which commercial banksand foreign exchange markets settle payments generally in each (if any) Additional Business Centre; and

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(b) in relation to any sum payable in a currency other than euro, a day on which commercial banks and foreignexchange markets settle payments generally in London, in the Principal Financial Centre of the relevantcurrency and in each (if any) Additional Business Centre;

“Business Day Convention”, in relation to any particular date, has the meaning given in the relevant FinalTerms and, if so specified in the relevant Final Terms, may have different meanings in relation to different datesand, in this context, the following expressions shall have the following meanings:

(a) “Following Business Day Convention” means that the relevant date shall be postponed to the firstfollowing day that is a Business Day;

(b) “Modified Following Business Day Convention” or “Modified Business Day Convention” means thatthe relevant date shall be postponed to the first following day that is a Business Day unless that day fallsin the next calendar month in which case that date will be the first preceding day that is a Business Day;

(c) “Preceding Business Day Convention” means that the relevant date shall be brought forward to the firstpreceding day that is a Business Day;

(d) “FRN Convention”, “Floating Rate Convention” or “Eurodollar Convention” means that each relevantdate shall be the date which numerically corresponds to the preceding such date in the calendar monthwhich is the number of months specified in the relevant Final Terms as the Specified Period after thecalendar month in which the preceding such date occurred provided, however, that:

(i) if there is no such numerically corresponding day in the calendar month in which any such dateshould occur, then such date will be the last day which is a Business Day in that calendar month;

(ii) if any such date would otherwise fall on a day which is not a Business Day, then such date will bethe first following day which is a Business Day unless that day falls in the next calendar month, inwhich case it will be the first preceding day which is a Business Day; and

(iii) if the preceding such date occurred on the last day in a calendar month which was a Business Day,then all subsequent such dates will be the last day which is a Business Day in the calendar monthwhich is the specified number of months after the calendar month in which the preceding such dateoccurred; and

(e) “No Adjustment” means that the relevant date shall not be adjusted in accordance with any Business DayConvention;

“Calculation Agent” means the Fiscal Agent or such other Person specified in the relevant Final Terms as theparty responsible for calculating the Rate(s) of Interest and Interest Amount(s) and/or such other amount(s) asmay be specified in the relevant Final Terms;

“Calculation Amount” has the meaning given in the relevant Final Terms;

“Change of Control” has the meaning given to it in Condition 9(f) (Change of Control Put Option);

“Change of Control Period” has the meaning given to it in Condition 9(f) (Change of Control Put Option);

“Change of Control Put Event Notice” has the meaning given to it in Condition 9(f) (Change of Control Put Option);

“Change of Control Put Option Notice” has the meaning given to it in Condition 9(f) (Change of Control Put Option);

“Change of Control Put Period” has the meaning given to it in Condition 9(f) (Change of Control Put Option);

“Coupon Sheet” means, in respect of a Note, a coupon sheet relating to the Note;

“Day Count Fraction” means, in respect of the calculation of an amount for any period of time(the “Calculation Period”), such day count fraction as may be specified in these Conditions or the relevantFinal Terms and:

(a) if “Actual/Actual (ICMA)” is so specified, means:

(i) where the Calculation Period is equal to or shorter than the Regular Period during which it falls, theactual number of days in the Calculation Period divided by the product of (1) the actual number ofdays in such Regular Period and (2) the number of Regular Periods in any year; and

(ii) where the Calculation Period is longer than one Regular Period, the sum of:

(A) the actual number of days in such Calculation Period falling in the Regular Period in which itbegins divided by the product of (1) the actual number of days in such Regular Period and (2)the number of Regular Periods in any year; and

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(B) the actual number of days in such Calculation Period falling in the next Regular Period dividedby the product of (a) the actual number of days in such Regular Period and (2) the number ofRegular Periods in any year;

(iii) if “Actual/Actual (ISDA)” is so specified, means the actual number of days in the CalculationPeriod divided by 365 (or, if any portion of the Calculation Period falls in a leap year, the sum of(A) the actual number of days in that portion of the Calculation Period falling in a leap year dividedby 366 and (B) the actual number of days in that portion of the Calculation Period falling in anon-leap year divided by 365);

(iv) if “Actual/365 (Fixed)” is so specified, means the actual number of days in the Calculation Perioddivided by 365;

(v) if “Actual/360” is so specified, means the actual number of days in the Calculation Period dividedby 360;

(vi) if “30/360” is so specified, the number of days in the Calculation Period divided by 360, calculatedon a formula basis as follows

Day Count Fraction =

where:

“Y1” is the year, expressed as a number, in which the first day of the Calculation Period falls;

“Y2” is the year, expressed as a number, in which the day immediately following the last day includedin the Calculation Period falls;

“M1” is the calendar month, expressed as a number, in which the first day of the CalculationPeriod falls;

“M2” is the calendar month, expressed as number, in which the day immediately following the lastday included in the Calculation Period falls;

“D1” is the first calendar day, expressed as a number, of the Calculation Period, unless such numberwould be 31, in which case D1 will be 30; and

“D2” is the calendar day, expressed as a number, immediately following the last day included inthe Calculation Period, unless such number would be 31 and D1 is greater than 29, in which case D2will be 30”;

(vii) if “30E/360” or “Eurobond Basis” is so specified, the number of days in the Calculation Perioddivided by 360, calculated on a formula basis as follows:

Day Count Fraction =

where:

“Y1” is the year, expressed as a number, in which the first day of the Calculation Period falls;

“Y2” is the year, expressed as a number, in which the day immediately following the last day includedin the Calculation Period falls;

“M1” is the calendar month, expressed as a number, in which the first day of the CalculationPeriod falls;

“M2” is the calendar month, expressed as a number, in which the day immediately following thelast day included in the Calculation Period falls;

“D1” is the first calendar day, expressed as a number, of the Calculation Period, unless such numberwould be 31, in which case D1 will be 30; and

“D2” is the calendar day, expressed as a number, immediately following the last day included in theCalculation Period, unless such number would be 31, in which case D2 will be 30; and

[360 x (Y2 — Y1)] + [30 x (M2 — M1)] + (D2 — D1)

360

[360 x (Y2 — Y1)] + [30 x (M2 — M1)] + (D2 — D1)

360

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if “30E/360 (ISDA)” is so specified, the number of days in the Calculation Period divided by 360,calculated on a formula basis as follows:

Day Count Fraction =

where:

“Y1” is the year, expressed as a number, in which the first day of the Calculation Period falls;

“Y2” is the year, expressed as a number, in which the day immediately following the last day includedin the Calculation Period falls;

“M1” is the calendar month, expressed as a number, in which the first day of the CalculationPeriod falls;

“M2” is the calendar month, expressed as a number, in which the day immediately following thelast day included in the Calculation Period falls;

“D1” is the first calendar day, expressed as a number, of the Calculation Period, unless (i) that dayis the last day of February or (ii) such number would be 31, in which case D1 will be 30; and

“D2” is the calendar day, expressed as a number, immediately following the last day included in theCalculation Period, unless (i) that day is the last day of February but not the Maturity Date or (ii) suchnumber would be 31, in which case D2 will be 30,

provided, however, that in each such case the number of days in the Calculation Period is calculated fromand including the first day of the Calculation Period to but excluding the last day of the Calculation Period;

“Early Redemption Amount (Tax)” means, in respect of any Note, its principal amount or such other amountas may be specified in the relevant Final Terms;

“Early Termination Amount” means, in respect of any Note, its principal amount or such other amount asmay be specified in these Conditions or the relevant Final Terms;

“EBITDA” means (i) the consolidated operating profit of the Group or (ii) in the case of a Material Subsidiary,the consolidated or unconsolidated operating profit of such Material Subsidiary, in the case of both (i) and (ii)before taking into account:

(a) depreciation and amortisation;

(b) finance income and finance costs;

(c) revaluation of property, plant and equipment, and investment property;

(d) impairment of property, plant and equipment;

(e) current year income tax expense and deferred income tax (expense)/benefit

(f) any revaluation of non-current assets; and

(g) extraordinary and exceptional items, as defined by IFRS or separately identified as such within the mostrecent publicly available annual or interim financial statements of the Issuer or the relevant MaterialSubsidiary (as the case may be), prepared in accordance with IFRS;

“EURIBOR” means, in respect of any specified currency and any specified period, the interest rate benchmarkknown as the Euro zone interbank offered rate which is calculated and published by a designated distributor(currently Thomson Reuters) in accordance with the requirements from time to time of the European MoneyMarkets Institute (or any other person which takes over the administration of that rate) based on estimatedinterbank borrowing rates for a number of designated currencies and maturities which are provided, in respectof each such currency, by a panel of contributor banks (details of historic EURIBOR rates can be obtained fromthe designated distributor);

“Extraordinary Resolution” means a resolution passed at a Meeting duly convened and held in accordancewith the provisions for meetings of Noteholders scheduled to the Agency Agreement by a majority of not lessthan three quarters of the votes cast;

“Final Redemption Amount” means, in respect of any Note, its principal amount or such other amount as maybe specified in the relevant Final Terms;

“First Interest Payment Date” means the date specified in the relevant Final Terms;

[360 x (Y2 — Y1)] + [30 x (M2 — M1)] + (D2 — D1)

360

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“Fixed Coupon Amount” has the meaning given in the relevant Final Terms;

“Group” means the Issuer and its Subsidiaries taken as a whole;

“Guarantee” means, in relation to any Indebtedness of any Person, any obligation of another Person to paysuch Indebtedness including (without limitation):

(a) any obligation to purchase such Indebtedness;

(b) any obligation to lend money, to purchase or subscribe shares or other securities or to purchase assets orservices in order to provide funds for the payment of such Indebtedness;

(c) any indemnity against the consequences of a default in the payment of such Indebtedness; and

(d) any other agreement to be responsible for such Indebtedness;

“Holder”, in the case of Bearer Notes, has the meaning given in Condition 3(b) (Form, Denomination, Titleand Transfer—Title to Bearer Notes) and, in the case of Registered Notes, has the meaning given inCondition 3(d) (Form, Denomination, Title and Transfer—Title to Registered Notes);

“IFRS” means the International Financial Reporting Standards as adopted by the E.U.;

“Indebtedness” means any indebtedness of any Person for money borrowed or raised including (withoutlimitation) any indebtedness for or in respect of:

(a) amounts raised by acceptance under any acceptance credit facility;

(b) amounts raised under any note purchase facility;

(c) the amount of any liability in respect of leases or hire purchase contracts which would, in accordance withapplicable law and generally accepted accounting principles, be treated as finance or capital leases;

(d) the amount of any liability in respect of any purchase price for assets or services the payment of which isdeferred for a period in excess of 60 days; and

(e) amounts raised under any other transaction (including, without limitation, any forward sale or purchaseagreement) having the commercial effect of a borrowing;

“Initial Rate of Interest” means the rate (expressed as a percentage per annum) of interest initially payable inrespect of the Notes specified in the relevant Final Terms;

“Interest Amount” means, in relation to a Note and an Interest Period, the amount of interest payable in respectof that Note for that Interest Period;

“Interest Commencement Date” means the Issue Date of the Notes or such other date as may be specified asthe Interest Commencement Date in the relevant Final Terms;

“Interest Determination Date” has the meaning given in the relevant Final Terms;

“Interest Payment Date” means the First Interest Payment Date and any other date or dates specified as suchin, or determined in accordance with the provisions of, the relevant Final Terms and, if a Business DayConvention is specified in the relevant Final Terms:

(a) as the same may be adjusted in accordance with the relevant Business Day Convention; or

(b) if the Business Day Convention is the FRN Convention, Floating Rate Convention or EurodollarConvention and an interval of a number of calendar months is specified in the relevant Final Terms asbeing the Specified Period, each of such dates as may occur in accordance with the FRN Convention,Floating Rate Convention or Eurodollar Convention at such Specified Period of calendar months followingthe Interest Commencement Date (in the case of the first Interest Payment Date) or the previous InterestPayment Date (in any other case);

“Interest Period” means each period beginning on (and including) the Interest Commencement Date or anyInterest Payment Date and ending on (but excluding) the next Interest Payment Date;

“ISDA Definitions” means the 2006 ISDA Definitions (as amended and updated as at the date of issue of thefirst Tranche of the Notes of the relevant Series (as specified in the relevant Final Terms) as published bythe International Swaps and Derivatives Association, Inc.);

“Issue Date” has the meaning given in the relevant Final Terms;

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“LIBOR” means, in respect of any specified currency and any specified period, the interest rate benchmarkknown as the London interbank offered rate which is calculated and published by a designated distributor(currently Thomson Reuters) in accordance with the requirements from time to time of ICE BenchmarkAdministration Limited (or any other person which takes over the administration of that rate) based on estimatedinterbank borrowing rates for a number of designated currencies and maturities which are provided, in respectof each such currency, by a panel of contributor banks (details of historic LIBOR rates can be obtained fromthe designated distributor);

“Make Whole Margin” has the meaning given to it in Condition 9(c) (Redemption at the option of the Issuer);

“Make Whole Redemption Amount” has the meaning given to it in Condition 9(c) (Redemption at the optionof the Issuer);

“Margin” has the meaning given in the relevant Final Terms;

“Material Subsidiary” means at any relevant time a Subsidiary of the Issuer:

(a) whose total consolidated (or, if applicable, unconsolidated) assets (excluding intercompany loans,intercompany payables, intercompany receivables and intercompany unrealised gains and losses ininventories) represent not less than 10 per cent. of the total consolidated assets of the Issuer, or whosegross consolidated EBITDA (or, if applicable, unconsolidated) represents not less than 10 per cent. of thegross consolidated EBITDA of the Issuer, in each case as determined by reference to the most recentpublicly available annual or interim financial statements of the Issuer prepared in accordance with IFRSand the latest financial statements of the Subsidiary determined in accordance with IFRS; or

(b) to which is transferred all or substantially all of the assets and undertakings of a Subsidiary whichimmediately prior to such transfer is a Material Subsidiary;

“Maturity Date” has the meaning given in the relevant Final Terms;

“Maximum Redemption Amount” has the meaning given in the relevant Final Terms;

“Meeting” means a meeting of Noteholders (whether originally convened or resumed following an adjournment);

“Minimum Redemption Amount” has the meaning given in the relevant Final Terms;

“Noteholder”, in the case of Bearer Notes, has the meaning given in Condition 3(b) (Form, Denomination,Title and Transfer—Title to Bearer Notes) and, in the case of Registered Notes, has the meaning given inCondition 3(d) (Form, Denomination, Title and Transfer—Title to Registered Notes);

“Optional Redemption Amount (Call)” means, in respect of any Note, its principal amount, the Make WholeRedemption Amount, or such other amount as may be specified in the relevant Final Terms;

“Optional Redemption Amount (Put)” means, in respect of any Note, its principal amount or such otheramount as may be specified in the relevant Final Terms;

“Optional Redemption Date (Call)” has the meaning given in the relevant Final Terms;

“Optional Redemption Date (Put)” has the meaning given in the relevant Final Terms;

“Par Redemption Date” has the meaning given to it in Condition 9(c) (Redemption at the option of the Issuer);

“Participating Member State” means a Member State of the E.U. which adopts the euro as its lawful currencyin accordance with the Treaty;

“Payment Business Day” means:

(a) if the currency of payment is euro, any day which is:

(i) a day on which banks in the relevant place of presentation are open for presentation and payment ofbearer debt securities and for dealings in foreign currencies; and

(ii) in the case of payment by transfer to an account, a TARGET Settlement Day and a day on whichdealings in foreign currencies may be carried on in each (if any) Additional Financial Centre; or

(b) if the currency of payment is not euro, any day which is:

(i) a day on which banks in the relevant place of presentation are open for presentation and payment ofbearer debt securities and for dealings in foreign currencies; and

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(ii) in the case of payment by transfer to an account, a day on which dealings in foreign currencies maybe carried on in the Principal Financial Centre of the currency of payment and in each (if any)Additional Financial Centre;

“Permitted Restructuring” means:

(a) any disposal by any Material Subsidiary of all or any part of its business, undertaking or assets, on anarm’s length basis, to the Issuer or any other Subsidiary;

(b) any solvent amalgamation, consolidation or merger of a Material Subsidiary with the Issuer or any otherSubsidiary; or

(c) any amalgamation, consolidation, restructuring, merger or reorganisation on terms previously approvedby an Extraordinary Resolution;

“Permitted Security Interest” means:

(a) a Security Interest which is created to secure or provide for the payment of Relevant Indebtedness inconnection with any Project Financing provided that the assets or revenues subject to such Security Interestare (i) assets which are used or to be used in or in connection with the project to which such ProjectFinancing relates or (ii) revenues or claims which arise from the operation, failure to meet specifications,exploitation, sale or loss of, or damage to, such assets; or

(b) any Security Interest created over any asset of any company which becomes a Subsidiary after the IssueDate of the first Tranche of the Notes, where such Security Interest is created prior to the date on whichthe company becomes a Subsidiary, provided that:

(i) such Security Interest was not created in contemplation of the acquisition of such company; and

(ii) the principal amount secured was not increased in contemplation of or since the acquisition (orproposed acquisition) of that company;

“Person” means any individual, company, corporation, firm, partnership, joint venture, association, organisation,state or agency of a state or other entity, whether or not having separate legal personality;

“Principal Financial Centre” means, in relation to any currency, the principal financial centre for that currencyprovided, however, that:

(a) in relation to euro, it means the principal financial centre of such Member State of the EuropeanCommunities as is selected (in the case of a payment) by the payee or (in the case of a calculation) bythe Calculation Agent; and

(b) in relation to New Zealand dollars, it means either Wellington or Auckland as is selected (in the case of apayment) by the payee or (in the case of a calculation) by the Calculation Agent;

“Project Financing” means any Indebtedness incurred solely to finance a project or the restructuring orexpansion of an existing project, in each case for the acquisition, construction, development or exploitation ofany assets pursuant to which the Person or Persons to whom such Indebtedness is or may be owed by the relevantborrower (whether or not a member of the Group) (i) expressly agrees that the principal source of repaymentof such funds will be the assets of the project and the revenues generated by such project (or by such restructuringor expansion thereof) and (ii) has no other recourse whatsoever to any member of the Group (or its assets and/orrevenues) for the repayment of, or a payment of, any sum relating to such Indebtedness;

“Put Option Notice” means a notice which must be delivered to a Paying Agent by any Noteholder wanting toexercise a right to redeem a Note at the option of the Noteholder;

“Put Option Receipt” means a receipt issued by a Paying Agent to a depositing Noteholder upon deposit of aNote with such Paying Agent by any Noteholder wanting to exercise a right to redeem a Note at the option ofthe Noteholder;

“Rate of Interest” means the rate or rates (expressed as a percentage per annum) of interest payable in respect ofthe Notes specified in the relevant Final Terms or calculated or determined in accordance with the provisionsof these Conditions and/or the relevant Final Terms;

“Rating Event” has the meaning given to it in Condition 9(f) (Change of Control Put Option);

“Rating Agency” means Standard & Poor’s Credit Market Services Europe Limited and its successors and/orany other rating agency of equivalent standing notified by the Issuer to the Noteholders in accordance withCondition 19 (Notices).

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“Redemption Amount” means, as appropriate, the Final Redemption Amount, the Early Redemption Amount (Tax),the Optional Redemption Amount (Call), the Optional Redemption Amount (Put), the Early Termination Amountor such other amount in the nature of a redemption amount as may be specified in the relevant Final Terms;

“Reference Banks” has the meaning given in the relevant Final Terms or, if none, four major banks selectedby the Calculation Agent in the market that is most closely connected with the Reference Rate;

“Reference Price” has the meaning given in the relevant Final Terms;

“Reference Rate” means EURIBOR or LIBOR as specified in the relevant Final Terms in respect of thecurrency and period specified in the relevant Final Terms;

“Reference Time” has the meaning given to it in Condition 9(c) (Redemption at the option of the Issuer);

“Regular Period” means:

(a) in the case of Notes where interest is scheduled to be paid only by means of regular payments, each periodfrom and including the Interest Commencement Date to but excluding the first Interest Payment Date andeach successive period from and including one Interest Payment Date to but excluding the next InterestPayment Date;

(b) in the case of Notes where, apart from the first Interest Period, interest is scheduled to be paid only bymeans of regular payments, each period from and including a Regular Date falling in any year to butexcluding the next Regular Date, where “Regular Date” means the day and month (but not the year) onwhich any Interest Payment Date falls; and

(c) in the case of Notes where, apart from one Interest Period other than the first Interest Period, interest isscheduled to be paid only by means of regular payments, each period from and including a Regular Datefalling in any year to but excluding the next Regular Date, where “Regular Date” means the day andmonth (but not the year) on which any Interest Payment Date falls other than the Interest Payment Datefalling at the end of the irregular Interest Period.

“Relevant Date” means, in relation to any payment, whichever is the later of (a) the date on which the paymentin question first becomes due and (b) if the full amount payable has not been received in the Principal FinancialCentre of the currency of payment by the Fiscal Agent on or prior to such due date, the date on which (the fullamount having been so received) notice to that effect has been given to the Noteholders;

“Relevant Financial Centre” has the meaning given in the relevant Final Terms;

“Relevant Indebtedness” means any Indebtedness which is in the form of or represented by any bond, note,debenture, debenture stock, loan stock, certificate or other instrument which is, or is capable of being, listed, quotedor traded on any stock exchange or in any securities market (including, without limitation, any over-the-countermarket);

“Relevant Screen Page” means the page, section or other part of a particular information service (including,without limitation, Reuters) specified as the Relevant Screen Page in the relevant Final Terms, or such otherpage, section or other part as may replace it on that information service or such other information service, ineach case, as may be nominated by the Person providing or sponsoring the information appearing there for thepurpose of displaying rates or prices comparable to the Reference Rate;

“Relevant Time” has the meaning given in the relevant Final Terms;

“Reserved Matter” means any proposal to change any date fixed for payment of principal or interest in respectof the Notes, to reduce the amount of principal or interest payable on any date in respect of the Notes, to alterthe method of calculating the amount of any payment in respect of the Notes or the date for any such payment,to change the currency of any payment under the Notes or to change the quorum requirements relating tomeetings or the majority required to pass an Extraordinary Resolution;

“Security Interest” means any mortgage, charge, pledge, lien or other security interest including, withoutlimitation, anything analogous to any of the foregoing under the laws of any jurisdiction;

“Specified Currency” has the meaning given in the relevant Final Terms;

“Specified Denomination(s)” has the meaning given in the relevant Final Terms;

“Specified Office” has the meaning given in the Agency Agreement;

“Specified Period” has the meaning given in the relevant Final Terms;

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“Subsidiary” means, in relation to any Person (the “first Person”) at any particular time, any other Person(the “second Person”):

(a) whose affairs and policies the first Person controls or has the power to control, whether by ownership ofshare capital, contract, the power to appoint or remove members of the governing body of the secondPerson or otherwise; or

(b) whose financial statements are, in accordance with applicable law and generally accepted accountingprinciples, consolidated with those of the first Person;

“Talon” means a talon for further Coupons;

“TARGET2” means the Trans-European Automated Real-Time Gross Settlement Express Transfer paymentsystem which utilises a single shared platform and which was launched on 19 November 2007;

“TARGET Settlement Day” means any day on which TARGET2 is open for the settlement of payments in euro;

“Treaty” means the Treaty of the Functioning of the European Union, as amended; and

“Zero Coupon Note” means a Note specified as such in the relevant Final Terms;

(b) Interpretation: In these Conditions:

(i) if the Notes are Zero Coupon Notes, references to Coupons and Couponholders are not applicable;

(ii) if Talons are specified in the relevant Final Terms as being attached to the Notes at the time of issue,references to Coupons shall be deemed to include references to Talons;

(iii) if Talons are not specified in the relevant Final Terms as being attached to the Notes at the time of issue,references to Talons are not applicable;

(iv) any reference to principal shall be deemed to include the Redemption Amount, any additional amounts inrespect of principal which may be payable under Condition 12 (Taxation), any premium payable in respectof a Note and any other amount in the nature of principal payable pursuant to these Conditions;

(v) any reference to interest shall be deemed to include any additional amounts in respect of interest whichmay be payable under Condition 12 (Taxation) and any other amount in the nature of interest payablepursuant to these Conditions;

(vi) references to Notes being “outstanding” shall be construed in accordance with the Agency Agreement;

(vii) if an expression is stated in Condition 2(a) (Definitions) to have the meaning given in the relevant FinalTerms, but the relevant Final Terms gives no such meaning or specifies that such expression is “notapplicable” then such expression is not applicable to the Notes; and

(viii) any reference to the Agency Agreement shall be construed as a reference to the Agency Agreement asamended and/or supplemented up to and including the Issue Date of the Notes.

3. Form, Denomination, Title and Transfer

(a) Bearer Notes: Bearer Notes are in the Specified Denomination(s) with Coupons and, if specified in the relevantFinal Terms, Talons attached at the time of issue. In the case of a Series of Bearer Notes with more than oneSpecified Denomination, Bearer Notes of one Specified Denomination will not be exchangeable for BearerNotes of another Specified Denomination.

(b) Title to Bearer Notes: Title to Bearer Notes and the Coupons will pass by delivery. In the case of Bearer Notes,“Holder” means the holder of such Bearer Note and “Noteholder” and “Couponholder” shall be construedaccordingly.

(c) Registered Notes: Registered Notes are in the Specified Denomination(s), which may include a minimumdenomination specified in the relevant Final Terms and higher integral multiples of a smaller amount specifiedin the relevant Final Terms.

(d) Title to Registered Notes: The Registrar will maintain the register in accordance with the provisions of theAgency Agreement. A certificate (each, a “Note Certificate”) will be issued to each Holder of Registered Notesin respect of its registered holding. Each Note Certificate will be numbered serially with an identifying numberwhich will be recorded in the Register. In the case of Registered Notes, “Holder” means the person in whosename such Registered Note is for the time being registered in the Register (or, in the case of a joint holding, thefirst named thereof) and “Noteholder” shall be construed accordingly.

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(e) Ownership: The Holder of any Note or Coupon shall (except as otherwise required by law) be treated as itsabsolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust orany other interest therein, any writing thereon or, in the case of Registered Notes, on the Note Certificate relatingthereto (other than the endorsed form of transfer) or any notice of any previous loss or theft thereof) and noPerson shall be liable for so treating such Holder. No person shall have any right to enforce any term or conditionof any Note under the Contracts (Rights of Third Parties) Act 1999.

(f) Transfers of Registered Notes: Subject to paragraphs (i) (Closed periods) and (j) (Regulations concerningtransfers and registration) below, a Registered Note may be transferred upon surrender of the relevant NoteCertificate, with the endorsed form of transfer duly completed, at the Specified Office of the Registrar or anyTransfer Agent, together with such evidence as the Registrar or (as the case may be) such Transfer Agent mayreasonably require to prove the title of the transferor and the authority of the individuals who have executed theform of transfer; provided, however, that a Registered Note may not be transferred unless the principal amountof Registered Notes transferred and (where not all of the Registered Notes held by a Holder are being transferred)the principal amount of the balance of Registered Notes not transferred are Specified Denominations. Wherenot all the Registered Notes represented by the surrendered Note Certificate are the subject of the transfer, anew Note Certificate in respect of the balance of the Registered Notes will be issued to the transferor.

(g) Registration and delivery of Note Certificates: Within five business days of the surrender of a Note Certificatein accordance with paragraph (f) (Transfers of Registered Notes) above, the Registrar will register the transferin question and deliver a new Note Certificate of a like principal amount to the Registered Notes transferred toeach relevant Holder at its Specified Office or (as the case may be) the Specified Office of any Transfer Agentor (at the request and risk of any such relevant Holder) by uninsured first class mail (airmail if overseas) to theaddress specified for the purpose by such relevant Holder. In this paragraph, “business day” means a day onwhich commercial banks are open for general business (including dealings in foreign currencies) in the citywhere the Registrar or (as the case may be) the relevant Transfer Agent has its Specified Office.

(h) No charge: The transfer of a Registered Note will be effected without charge by or on behalf of the Issuer orthe Registrar or any Transfer Agent but against such indemnity as the Registrar or (as the case may be) suchTransfer Agent may require in respect of any tax or other duty of whatsoever nature which may be levied orimposed in connection with such transfer.

(i) Closed periods: Noteholders may not require transfers to be registered during the period of 15 days ending onthe due date for any payment of principal or interest in respect of the Registered Notes.

(j) Regulations concerning transfers and registration: All transfers of Registered Notes and entries on the Registerare subject to the detailed regulations concerning the transfer of Registered Notes scheduled to the AgencyAgreement. The regulations may be changed by the Issuer with the prior written approval of the Registrar. Acopy of the current regulations will be mailed (free of charge) by the Registrar to any Noteholder who requestsin writing a copy of such regulations.

4. Status

The Notes constitute direct, unconditional, unsubordinated and unsecured obligations of the Issuer which will at alltimes rank pari passu among themselves and at least pari passu with all other present and future unsecuredobligations of the Issuer, save for such obligations as may be preferred by provisions of law that are both mandatoryand of general application.

5. Negative Pledge

So long as any Note remains outstanding, the Issuer shall not, and shall procure that none of its Material Subsidiarieswill, create or permit to subsist any Security Interest, other than a Permitted Security Interest, upon the whole orany part of its present or future business, undertaking, assets or revenues (including any uncalled capital) to secureany Relevant Indebtedness or Guarantee of Relevant Indebtedness without (a) at the same time or prior theretosecuring the Notes equally and rateably therewith or (b) providing such other security for the Notes as may beapproved by an Extraordinary Resolution of Noteholders.

6. Fixed Rate Note Provisions

(a) Application: This Condition 6 (Fixed Rate Note Provisions) is applicable to the Notes only if the Fixed RateNote Provisions are specified in the relevant Final Terms as being applicable.

(b) Accrual of interest: The Notes bear interest from the Interest Commencement Date at the Rate of Interest payablein arrear on each Interest Payment Date, subject as provided in Condition 10 (Payments—Bearer Notes). Each

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Note will cease to bear interest from the due date for final redemption unless, upon due presentation, paymentof the Redemption Amount is improperly withheld or refused, in which case it will continue to bear interest inaccordance with this Condition 6 (after as well as before judgment) until whichever is the earlier of (i) the dayon which all sums due in respect of such Note up to that day are received by or on behalf of the relevantNoteholder and (ii) the day which is seven days after the Fiscal Agent has notified the Noteholders that it hasreceived all sums due in respect of the Notes up to such seventh day (except to the extent that there is anysubsequent default in payment).

(c) Fixed Coupon Amount: The amount of interest payable in respect of each Note for any Interest Period shall bethe relevant Fixed Coupon Amount and, if the Notes are in more than one Specified Denomination, shall be therelevant Fixed Coupon Amount in respect of the relevant Specified Denomination.

(d) Calculation of interest amount: The amount of interest payable in respect of each Note for any period for whicha Fixed Coupon Amount is not specified shall be calculated by applying the Rate of Interest to the CalculationAmount, multiplying the product by the relevant Day Count Fraction, rounding the resulting figure to the nearestsub-unit of the Specified Currency (half a sub-unit being rounded upwards) and multiplying such rounded figureby a fraction equal to the Specified Denomination of such Note divided by the Calculation Amount. For thispurpose a “sub-unit” means, in the case of any currency other than euro, the lowest amount of such currencythat is available as legal tender in the country of such currency and, in the case of euro, means one cent.

7. Floating Rate Note Provisions

(a) Application: This Condition 7 (Floating Rate Note Provisions) is applicable to the Notes only if the FloatingRate Note Provisions are specified in the relevant Final Terms as being applicable.

(b) Accrual of interest: The Notes bear interest from the Interest Commencement Date at the Rate of Interest payablein arrear on each Interest Payment Date, subject as provided in Condition 10 (Payments—Bearer Notes). EachNote will cease to bear interest from the due date for final redemption unless, upon due presentation, paymentof the Redemption Amount is improperly withheld or refused, in which case it will continue to bear interestin accordance with this Condition (after as well as before judgment) until whichever is the earlier of (i) the dayon which all sums due in respect of such Note up to that day are received by or on behalf of the relevantNoteholder and (ii) the day which is seven days after the Fiscal Agent has notified the Noteholders that it hasreceived all sums due in respect of the Notes up to such seventh day (except to the extent that there is anysubsequent default in payment).

(c) Screen Rate Determination: If Screen Rate Determination is specified in the relevant Final Terms as the mannerin which the Rate(s) of Interest is/are to be determined, the Rate of Interest applicable to the Notes for eachInterest Period will be determined by the Calculation Agent on the following basis:

(i) if the Reference Rate is a composite quotation or customarily supplied by one entity, the Calculation Agentwill determine the Reference Rate which appears on the Relevant Screen Page as of the Relevant Timeon the relevant Interest Determination Date;

(ii) if Linear Interpolation is specified as applicable in respect of an Interest Period in the applicable FinalTerms, the Rate of Interest for such Interest Period shall be calculated by the Calculation Agent bystraight-line linear interpolation by reference to two rates which appear on the Relevant Screen Page asof the Relevant Time on the relevant Interest Determination Date, where:

(A) one rate shall be determined as if the relevant Interest Period were the period of time for which ratesare available next shorter than the length of the relevant Interest Period; and

(B) the other rate shall be determined as if the relevant Interest Period were the period of time for whichrates are available next longer than the length of the relevant Interest Period; provided, however,that if no rate is available for a period of time next shorter or, as the case may be, next longer thanthe length of the relevant Interest Period, then the Calculation Agent shall determine such rate atsuch time and by reference to such sources as it determines appropriate;

(iii) in any other case, the Calculation Agent will determine the arithmetic mean of the Reference Rates whichappear on the Relevant Screen Page as of the Relevant Time on the relevant Interest Determination Date;

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(iv) if, in the case of (i) above, such rate does not appear on that page or, in the case of (iii) above, fewer thantwo such rates appear on that page or if, in either case, the Relevant Screen Page is unavailable, theCalculation Agent will:

(A) request the principal Relevant Financial Centre office of each of the Reference Banks to provide aquotation of the Reference Rate at approximately the Relevant Time on the Interest DeterminationDate to prime banks in the Relevant Financial Centre interbank market in an amount that isrepresentative for a single transaction in that market at that time; and

(B) determine the arithmetic mean of such quotations; and

(v) if fewer than two such quotations are provided as requested, the Calculation Agent will determine thearithmetic mean of the rates (being the nearest to the Reference Rate, as determined by the CalculationAgent) quoted by major banks in the Principal Financial Centre of the Specified Currency, selected bythe Calculation Agent, at approximately 11.00 a.m. (local time in the Principal Financial Centre of theSpecified Currency) on the first day of the relevant Interest Period for loans in the Specified Currency toleading European banks for a period equal to the relevant Interest Period and in an amount that isrepresentative for a single transaction in that market at that time,

and the Rate of Interest for such Interest Period shall be the sum of the Margin and the rate or (as the case maybe) the arithmetic mean so determined; provided, however, that if the Calculation Agent is unable to determinea rate or (as the case may be) an arithmetic mean in accordance with the above provisions in relation to anyInterest Period, the Rate of Interest applicable to the Notes during such Interest Period will be the sum of theMargin and the rate or (as the case may be) the arithmetic mean last determined in relation to the Notes inrespect of a preceding Interest Period.

(d) ISDA Determination: If ISDA Determination is specified in the relevant Final Terms as the manner in whichthe Rate(s) of Interest is/are to be determined, the Rate of Interest applicable to the Notes for each InterestPeriod will be the sum of the Margin and the relevant ISDA Rate where “ISDA Rate” in relation to any InterestPeriod means a rate equal to the Floating Rate (as defined in the ISDA Definitions) that would be determinedby the Calculation Agent under an interest rate swap transaction if the Calculation Agent were acting asCalculation Agent for that interest rate swap transaction under the terms of an agreement incorporating theISDA Definitions and under which:

(i) the Floating Rate Option (as defined in the ISDA Definitions) is as specified in the relevant FinalTerms;

(ii) the Designated Maturity (as defined in the ISDA Definitions) is a period specified in the relevantFinal Terms;

(iii) the relevant Reset Date (as defined in the ISDA Definitions) is either (A) if the relevant FloatingRate Option is based on LIBOR for a currency, the first day of that Interest Period or (B) in anyother case, as specified in the relevant Final Terms; and

(iv) if Linear Interpolation is specified as applicable in respect of an Interest Period in the applicableFinal Terms, the Rate of Interest for such Interest Period shall be calculated by the Calculation Agentby straight-line linear interpolation by reference to two rates based on the relevant Floating RateOption, where:

(A) one rate shall be determined as if the Designated Maturity were the period of time for whichrates are available next shorter than the length of the relevant Interest Period; and

(B) the other rate shall be determined as if the Designated Maturity were the period of time forwhich rates are available next longer than the length of the relevant Interest Period

provided, however, that if there is no rate available for a period of time next shorter than the lengthof the relevant Interest Period or, as the case may be, next longer than the length of the relevantInterest Period, then the Calculation Agent shall determine such rate at such time and by referenceto such sources as it determines appropriate.

(e) Maximum or Minimum Rate of Interest: If any Maximum Rate of Interest or Minimum Rate of Interest isspecified in the relevant Final Terms, then the Rate of Interest shall in no event be greater than the maximumor be less than the minimum so specified.

(f) Calculation of Interest Amount: The Calculation Agent will, as soon as practicable after the time at which theRate of Interest is to be determined in relation to each Interest Period, calculate the Interest Amount payable in

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respect of each Note for such Interest Period. The Interest Amount will be calculated by applying the Rate ofInterest for such Interest Period to the Calculation Amount, multiplying the product by the relevant Day CountFraction, rounding the resulting figure to the nearest sub-unit of the Specified Currency (half a sub-unit beingrounded upwards) and multiplying such rounded figure by a fraction equal to the Specified Denomination ofthe relevant Note divided by the Calculation Amount. For this purpose a “sub-unit” means, in the case of anycurrency other than euro, the lowest amount of such currency that is available as legal tender in the country ofsuch currency and, in the case of euro, means one cent.

(g) Publication: The Calculation Agent will cause each Rate of Interest and Interest Amount determined by it,together with the relevant Interest Payment Date, and any other amount(s) required to be determined by ittogether with any relevant payment date(s) to be notified to the Paying Agents and each competent authority,stock exchange and/or quotation system (if any) by which the Notes have then been admitted to listing, tradingand/or quotation as soon as practicable after such determination but (in the case of each Rate of Interest, InterestAmount and Interest Payment Date) in any event not later than the first day of the relevant Interest Period.Notice thereof shall also promptly be given to the Noteholders. The Calculation Agent will be entitled torecalculate any Interest Amount (on the basis of the foregoing provisions) without notice in the event of anextension or shortening of the relevant Interest Period. If the Calculation Amount is less than the minimumSpecified Denomination the Calculation Agent shall not be obliged to publish each Interest Amount but insteadmay publish only the Calculation Amount and the Interest Amount in respect of a Note having the minimumSpecified Denomination.

(h) Notifications etc: All notifications, opinions, determinations, certificates, calculations, quotations and decisionsgiven, expressed, made or obtained for the purposes of this Condition by the Calculation Agent will (in theabsence of manifest error) be binding on the Issuer, the Paying Agents, the Noteholders and the Couponholdersand (subject as aforesaid) no liability to any such Person will attach to the Calculation Agent in connection withthe exercise or non-exercise by it of its powers, duties and discretions for such purposes.

8. Zero Coupon Note Provisions

(a) Application: This Condition 8 (Zero Coupon Note Provisions) is applicable to the Notes only if the Zero CouponNote Provisions are specified in the relevant Final Terms as being applicable.

(b) Late payment on Zero Coupon Notes: If the Redemption Amount payable in respect of any Zero Coupon Noteis improperly withheld or refused, the Redemption Amount shall thereafter be an amount equal to the sum of:

(i) the Reference Price; and

(ii) the product of the Accrual Yield (compounded annually) being applied to the Reference Price on the basisof the relevant Day Count Fraction from (and including) the Issue Date to (but excluding) whichever isthe earlier of (i) the day on which all sums due in respect of such Note up to that day are received by oron behalf of the relevant Noteholder and (ii) the day which is seven days after the Fiscal Agent has notifiedthe Noteholders that it has received all sums due in respect of the Notes up to such seventh day (exceptto the extent that there is any subsequent default in payment).

9. Redemption and Purchase

(a) Scheduled redemption: Unless previously redeemed, or purchased and cancelled, the Notes will be redeemedat their Final Redemption Amount on the Maturity Date, subject as provided in Condition 10 (Payments—Bearer Notes) or Condition 11 (Payments—Registered Notes), as applicable.

(b) Redemption for tax reasons: The Notes may be redeemed at the option of the Issuer in whole, but not in part:

(i) at any time (unless the Floating Rate Note Provisions are specified in the relevant Final Terms as beingapplicable); or

(ii) on any Interest Payment Date (if the Floating Rate Note Provisions are specified in the relevant FinalTerms as being applicable),

on giving not less than 30 nor more than 60 days’ notice to the Noteholders, or such other period(s) asmay be specified in the relevant Final Terms, (which notice shall be irrevocable), at their Early RedemptionAmount (Tax), together with interest accrued (if any) to the date fixed for redemption, if:

(A) the Issuer has or will become obliged to pay additional amounts as provided or referred to inCondition 12 (Taxation) as a result of any change in, or amendment to, the laws or regulations ofthe Republic of Lithuania or any political subdivision or any authority thereof or therein having

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power to tax, or any change in the application or official interpretation of such laws or regulations,which change or amendment becomes effective on or after the date of issue of the first Tranche ofthe Notes; and

(B) such obligation cannot be avoided by the Issuer taking reasonable measures available to it,

provided, however, that no such notice of redemption shall be given earlier than:

(1) where the Notes may be redeemed at any time, 90 days (or such other period as may bespecified in the relevant Final Terms) prior to the earliest date on which the Issuer would beobliged to pay such additional amounts if a payment in respect of the Notes were then due; or

(2) where the Notes may be redeemed only on an Interest Payment Date, 60 days (or such otherperiod as may be specified in the relevant Final Terms) prior to the Interest Payment Dateoccurring immediately before the earliest date on which the Issuer would be obliged to paysuch additional amounts if a payment in respect of the Notes were then due.

Prior to the publication of any notice of redemption pursuant to this paragraph, the Issuer shalldeliver or procure that there is delivered to the Fiscal Agent (1) a certificate signed by two directorsof the Issuer stating that the Issuer is entitled to effect such redemption and setting forth a statementof facts showing that the conditions precedent to the right of the Issuer so to redeem have occurredand (2) an opinion of independent legal advisers of recognised standing to the effect that the Issuerhas or will become obliged to pay such additional amounts as a result of such change or amendment.Upon the expiry of any such notice as is referred to in this Condition 9(b), the Issuer shall be boundto redeem the Notes in accordance with this Condition 9(b).

(c) Redemption at the option of the Issuer: If the Call Option is specified in the relevant Final Terms as beingapplicable, the Notes may be redeemed at the option of the Issuer in whole or, if so specified in the relevantFinal Terms, in part on any Optional Redemption Date (Call) at the relevant Optional Redemption Amount(Call) on the Issuer’s giving not less than 30 nor more than 60 days’ notice to the Noteholders, or such otherperiod(s) as may be specified in the relevant final terms (which notice shall be irrevocable and shall oblige theIssuer to redeem the Notes or, as the case may be, the Notes specified in such notice on the relevant OptionalRedemption Date (Call) at the Optional Redemption Amount (Call) plus accrued interest (if any) to such date).

If the Optional Redemption Amount (Call) specified in the relevant Final Terms is the “Make-WholeRedemption Amount”, the Optional Redemption Amount (Call) will be the higher of:

(i) the principal amount of the Notes; and

(ii) the product of the principal amount of the Notes and the price, expressed as a percentage of the principalamount of the Notes (rounded to four decimal places with 0.00005 being rounded upwards), at which thethen current yield on the Notes on the Reference Date would be equal to the sum of (x) the current yield(determined by reference to the middle market price) at the Reference Time on the Reference Date of therelevant Benchmark Security plus (y) the Make-Whole Margin, as determined by the Calculation Agent,

provided however that, if the Optional Redemption Date occurs on or after the Par Redemption Date (if specifiedin the relevant Final Terms), the Make-Whole Redemption Amount will be the principal amount of the Notes.

The “Benchmark Security”, the “Reference Time”, the “Make-Whole Margin” and the “Par RedemptionDate” will be specified in the relevant Final Terms, provided however that, if “Linear Interpolation” is specifiedas applicable in the relevant Final Terms, the current yield of the Benchmark Security shall be determined bylinear interpolation (calculated to the nearest one twelfth of a year) of the yield of the two Benchmark Securitiesspecified in the Final Terms.

The “Reference Date” means the date which is the third London Business Day prior to the date fixed forredemption.

(d) Partial redemption: If the Notes are to be redeemed in part only on any date in accordance with Condition 9(c)(Redemption at the option of the Issuer), in the case of Bearer Notes, the Notes to be redeemed shall be selectedby the drawing of lots in such place as the Fiscal Agent approves and in such manner as the Fiscal Agentconsiders appropriate, subject to compliance with applicable law, the rules of each competent authority, stockexchange and/or quotation system (if any) by which the Notes have then been admitted to listing, trading and/orquotation and the notice to Noteholders referred to in Condition 9(c) (Redemption at the option of the Issuer)shall specify the serial numbers of the Notes so to be redeemed, and, in the case of Registered Notes, each Noteshall be redeemed in part in the proportion which the aggregate principal amount of the outstanding Notes tobe redeemed on the relevant Optional Redemption Date (Call) bears to the aggregate principal amount of

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outstanding Notes on such date. If any Maximum Redemption Amount or Minimum Redemption Amount isspecified in the relevant Final Terms, then the Optional Redemption Amount (Call) shall in no event be greaterthan the maximum or be less than the minimum so specified.

(e) Redemption at the option of Noteholders: If the Put Option is specified in the relevant Final Terms as beingapplicable, the Issuer shall, at the option of the Holder of any Note redeem such Note on the OptionalRedemption Date (Put) specified in the relevant Put Option Notice at the relevant Optional Redemption Amount(Put) together with interest (if any) accrued to such date. In order to exercise the option contained in thisCondition 9(e), the Holder of a Note must, not less than 30 nor more than 60 days before the relevant OptionalRedemption Date (Put) (or such other period(s) as may be specified in the relevant Final Terms), deposit withany Paying Agent such Note together with all unmatured Coupons relating thereto and a duly completed PutOption Notice in the form obtainable from any Paying Agent. The Paying Agent with which a Note is sodeposited shall deliver a duly completed Put Option Receipt to the depositing Noteholder. No Note, oncedeposited with a duly completed Put Option Notice in accordance with this Condition 9(e), may be withdrawn;provided, however, that if, prior to the relevant Optional Redemption Date (Put), any such Note becomesimmediately due and payable or, upon due presentation of any such Note on the relevant Optional RedemptionDate (Put), payment of the redemption moneys is improperly withheld or refused, the relevant Paying Agentshall mail notification thereof to the depositing Noteholder at such address as may have been given by suchNoteholder in the relevant Put Option Notice and shall hold such Note at its Specified Office for collection bythe depositing Noteholder against surrender of the relevant Put Option Receipt. For so long as any outstandingNote is held by a Paying Agent in accordance with this Condition 9(e), the depositor of such Note and not suchPaying Agent shall be deemed to be the Holder of such Note for all purposes.

(f) Change of Control Put Option

If this Condition 9(f) is specified as applicable in the relevant Final Terms, if at any time while any Note remainsoutstanding, (A) there occurs a Change of Control (as defined below), and (B) within the Change of ControlPeriod, a Rating Event in respect of that Change of Control occurs (such Change of Control and Rating Eventnot having been cured prior to the expiry of the Change of Control Period, together, a “Change of Control PutEvent”), each Noteholder will have the option (the “Change of Control Put Option”) (unless, prior to thegiving of the Change of Control Put Event Notice (as defined below), the Issuer gives notice to redeem theNotes under Condition 9(b) or 9(c)) to require the Issuer to redeem or, at the Issuer’s option, to procure thepurchase of, all or part of its Notes, on the Optional Redemption Date (as defined below) at the principal amountoutstanding of such Notes together with (or where purchased, together with an amount equal to) interest accruedto, but excluding, the Optional Redemption Date.

Where:

A “Change of Control” shall be deemed to have occurred if at any time following the Issue Date, the Republicof Lithuania ceases to hold, directly or indirectly, more than 51 per cent. of the shares or voting rights of theIssuer.

A “Rating Event” shall be deemed to have occurred in respect of a Change of Control if (within the Change ofControl Period) either (i) (A) the rating previously assigned to the Notes or to the Issuer by any Rating Agencysolicited by the Issuer is (x) withdrawn or (y) changed from an investment grade rating (BBB-/Baa3 or itsequivalent for the time being, or better) to a non-investment grade rating (BB+/Ba1 or its equivalent for thetime being, or worse) or (z) (if the rating previously assigned to the Notes or to the Issuer by any Rating Agencysolicited by the Issuer was below an investment grade rating (as described above)), lowered by at least one fullrating notch (for example, from BB+ to BB, or their respective equivalents) and (B) such rating is not withinthe Change of Control Period subsequently upgraded (in the case of a downgrade) or reinstated (in the case ofa withdrawal) either to an investment grade credit rating (in the case of (x) and (y)) or to its earlier credit ratingor better (in the case of (z)) by such Rating Agency or (ii) the Notes or the Issuer have not been previouslyassigned a credit rating solicited by the Issuer, and no Rating Agency assigns the Issuer or the Notes aninvestment grade rating solicited by the Issuer within the Change of Control Period, provided that the RatingAgency making the reduction in rating or deciding not to assign an investment grade rating announces orpublicly confirms or, having been so requested by the Issuer, informs the Issuer in writing that the lowering orfailure to assign an investment grade rating was the result, in whole or in part, of any event or circumstancecomprised in or arising as a result of, or in respect of, the applicable Change of Control (whether or not theapplicable Change of Control shall have occurred at the time of the Rating Event).

“Change of Control Period” means the period beginning on the date of the first public announcement by oron behalf the Issuer by any bidder or any designated advisor, of the relevant Change of Control and ending 90days after completion of the relevant Change of Control.

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Promptly upon the Issuer becoming aware that a Change of Control Put Event has occurred, the Issuer shallgive notice (a “Change of Control Put Event Notice”) to the Noteholders in accordance with Condition 19(Notices) specifying the nature of the Change of Control Put Event and the circumstances giving rise to it andthe procedure for exercising the Change of Control Put Option contained in this Condition 9(f).

To exercise the Change of Control Put Option, a Noteholder must transfer or cause to be transferred its Notesto be so redeemed or purchased to the account of the Fiscal Agent specified in the Change of Control Put OptionNotice (as defined below) for the account of the Issuer within the period (the “Change of Control Put Period”)of forty-five (45) days after a Change of Control Put Event Notice is given together with a duly signed andcompleted notice of exercise in the then current form obtainable from the Fiscal Agent (a “Change of ControlPut Option Notice”) and in which the Noteholder may specify a bank account to which payment is to be madeunder this Condition 9(f).

A Change of Control Put Option Notice once given shall be irrevocable. The Issuer shall redeem or, at the optionof the Issuer procure the purchase of, the Notes in respect of which the Change of Control Put Option has beenvalidly exercised as provided above, and subject to the transfer of such Notes to the account of the Fiscal Agentfor the account of the Issuer as described above by the date which is the fifth Business Day following the endof the Change of Control Put Period (the “Optional Redemption Date”). Payment in respect of such Noteswill be made on the Optional Redemption Date by transfer to the bank account specified in the Change ofControl Put Option Notice.

For the avoidance of doubt, the Issuer shall have no responsibility for any cost or loss of whatever kind (includingbreakage costs) which the Noteholder may incur as a result of or in connection with such Noteholder’s exerciseor purported exercise of, or otherwise in connection with, any Change of Control Put Option (whether as aresult of any purchase or redemption arising therefrom or otherwise).

If 75 per cent. or more in principal amount of the Notes then outstanding have been redeemed pursuant to thisCondition 9(f), the Issuer may, on not less than thirty (30) nor more than sixty (60) days’ irrevocable notice tothe Noteholders in accordance with Condition 19 (Notices) given within thirty (30) days after the OptionalRedemption Date, redeem on a date to be specified in such notice at its option, all (but not some only) of theremaining Notes at their principal amount, together with interest accrued to but excluding the date of redemption.

(g) No other redemption: The Issuer shall not be entitled to redeem the Notes otherwise than as provided inparagraphs (a) to (f) above.

(h) Early redemption of Zero Coupon Notes: Unless otherwise specified in the relevant Final Terms, the RedemptionAmount payable on redemption of a Zero Coupon Note at any time before the Maturity Date shall be an amountequal to the sum of:

(i) the Reference Price; and

(ii) the product of the Accrual Yield (compounded annually) being applied to the Reference Price from (andincluding) the Issue Date to (but excluding) the date fixed for redemption or (as the case may be) the dateupon which the Note becomes due and payable.

Where such calculation is to be made for a period which is not a whole number of years, the calculation inrespect of the period of less than a full year shall be made on the basis of such Day Count Fraction as may bespecified in the Final Terms for the purposes of this Condition 9(h) or, if none is so specified, a Day CountFraction of 30E/360.

(i) Purchase: The Issuer or any of its Subsidiaries may at any time purchase Notes in the open market or otherwiseand at any price, provided that all unmatured Coupons are purchased therewith.

(j) Cancellation: All Notes so redeemed or purchased by the Issuer or any of its Subsidiaries and any unmaturedCoupons attached to or surrendered with them may at the option of the Issuer be cancelled and all Notes socancelled may not be reissued or resold.

10. Payments—Bearer Notes

This Condition 10 is only applicable to Bearer Notes.

(a) Principal: Payments of principal shall be made only against presentation and (provided that payment is madein full) surrender of Bearer Notes at the Specified Office of any Paying Agent outside the United States bycheque drawn in the currency in which the payment is due on, or by transfer to an account denominated in thatcurrency (or, if that currency is euro, any other account to which euro may be credited or transferred) andmaintained by the payee with, a bank in the Principal Financial Centre of that currency.

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(b) Interest: Payments of interest shall, subject to paragraph (h) below, be made only against presentation and(provided that payment is made in full) surrender of the appropriate Coupons at the Specified Office of anyPaying Agent outside the United States in the manner described in paragraph (a) above.

(c) Payments in New York City: Payments of principal or interest may be made at the Specified Office of a PayingAgent in New York City if (i) the Issuer has appointed Paying Agents outside the United States with thereasonable expectation that such Paying Agents will be able to make payment of the full amount of the intereston the Notes in the currency in which the payment is due when due, (ii) payment of the full amount of suchinterest at the offices of all such Paying Agents is illegal or effectively precluded by exchange controls or othersimilar restrictions and (iii) payment is permitted by applicable United States law.

(d) Payments subject to fiscal laws: All payments in respect of the Notes are subject in all cases to any applicablefiscal or other laws and regulations in the place of payment, but without prejudice to the provisions ofCondition 12 (Taxation). No commissions or expenses shall be charged to the Noteholders or Couponholdersin respect of such payments.

(e) Deductions for unmatured Coupons: If the relevant Final Terms specifies that the Fixed Rate Note Provisionsare applicable and a Bearer Note is presented without all unmatured Coupons relating thereto:

(i) if the aggregate amount of the missing Coupons is less than or equal to the amount of principal due forpayment, a sum equal to the aggregate amount of the missing Coupons will be deducted from the amountof principal due for payment; provided, however, that if the gross amount available for payment is lessthan the amount of principal due for payment, the sum deducted will be that proportion of the aggregateamount of such missing Coupons which the gross amount actually available for payment bears to theamount of principal due for payment;

(ii) if the aggregate amount of the missing Coupons is greater than the amount of principal due for payment:

(A) so many of such missing Coupons shall become void (in inverse order of maturity) as will result inthe aggregate amount of the remainder of such missing Coupons (the “Relevant Coupons”) beingequal to the amount of principal due for payment; provided, however, that where this sub-paragraphwould otherwise require a fraction of a missing Coupon to become void, such missing Coupon shallbecome void in its entirety; and

(B) a sum equal to the aggregate amount of the Relevant Coupons (or, if less, the amount of principaldue for payment) will be deducted from the amount of principal due for payment; provided,however, that, if the gross amount available for payment is less than the amount of principal duefor payment, the sum deducted will be that proportion of the aggregate amount of the RelevantCoupons (or, as the case may be, the amount of principal due for payment) which the gross amountactually available for payment bears to the amount of principal due for payment.

Each sum of principal so deducted shall be paid in the manner provided in paragraph (a) above againstpresentation and (provided that payment is made in full) surrender of the relevant missing Coupons.

(f) Unmatured Coupons void: If the relevant Final Terms specifies that this Condition 10(f) is applicable or thatthe Floating Rate Note Provisions are applicable, on the due date for final redemption of any Note or earlyredemption in whole of such Note pursuant to Condition 9(b) (Redemption for tax reasons), Condition 9(e)(Redemption at the option of Noteholders), Condition 9(f) (Change of Control Put Option), Condition 9(c)(Redemption at the option of the Issuer) or Condition 13 (Events of Default), all unmatured Coupons relatingthereto (whether or not still attached) shall become void and no payment will be made in respect thereof.

(g) Payments on business days: If the due date for payment of any amount in respect of any Bearer Note or Couponis not a Payment Business Day in the place of presentation, the Holder shall not be entitled to payment in suchplace of the amount due until the next succeeding Payment Business Day in such place and shall not be entitledto any further interest or other payment in respect of any such delay.

(h) Payments other than in respect of matured Coupons: Payments of interest other than in respect of maturedCoupons shall be made only against presentation of the relevant Bearer Notes at the Specified Office of anyPaying Agent outside the United States (or in New York City if permitted by paragraph (c) above).

(i) Partial payments: If a Paying Agent makes a partial payment in respect of any Bearer Note or Coupon presentedto it for payment, such Paying Agent will endorse thereon a statement indicating the amount and date of suchpayment.

(j) Exchange of Talons: On or after the maturity date of the final Coupon which is (or was at the time of issue) partof a Coupon Sheet relating to the Bearer Notes, the Talon forming part of such Coupon Sheet may be exchanged

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at the Specified Office of the Fiscal Agent for a further Coupon Sheet (including, if appropriate, a further Talonbut excluding any Coupons in respect of which claims have already become void pursuant to Condition 14(Prescription). Upon the due date for redemption of any Bearer Note, any unexchanged Talon relating to suchNote shall become void and no Coupon will be delivered in respect of such Talon.

11. Payments—Registered Notes

This Condition 11 is only applicable to Registered Notes.

(a) Principal: Payments of principal shall be made by cheque drawn in the currency in which the payment is duedrawn on, or, upon application by a Holder of a Registered Note to the Specified Office of the Fiscal Agent notlater than the fifteenth day before the due date for any such payment, by transfer to an account denominated inthat currency (or, if that currency is euro, any other account to which euro may be credited or transferred) andmaintained by the payee with, a bank in the Principal Financial Centre of that currency (in the case of a sterlingcheque, a town clearing branch of a bank in the City of London) and (in the case of redemption) upon surrender(or, in the case of part payment only, endorsement) of the relevant Note Certificates at the Specified Office ofany Paying Agent.

(b) Interest: Payments of interest shall be made by cheque drawn in the currency in which the payment is due drawnon, or, upon application by a Holder of a Registered Note to the Specified Office of the Fiscal Agent not laterthan the fifteenth day before the due date for any such payment, by transfer to an account denominated in thatcurrency (or, if that currency is euro, any other account to which euro may be credited or transferred) andmaintained by the payee with, a bank in the Principal Financial Centre of that currency (in the case of a sterlingcheque, a town clearing branch of a bank in the City of London) and (in the case of interest payable onredemption) upon surrender (or, in the case of part payment only, endorsement) of the relevant Note Certificatesat the Specified Office of any Paying Agent.

(c) Payments subject to fiscal laws: All payments in respect of the Registered Notes are subject in all cases to anyapplicable fiscal or other laws and regulations in the place of payment, but without prejudice to the provisionsof Condition 12 (Taxation). No commissions or expenses shall be charged to the Noteholders in respect of suchpayments.

(d) Payments on business days: Where payment is to be made by transfer to an account, payment instructions (forvalue the due date, or, if the due date is not Payment Business Day, for value the next succeeding PaymentBusiness Day) will be initiated and, where payment is to be made by cheque, the cheque will be mailed (i) (inthe case of payments of principal and interest payable on redemption) on the later of the due date for paymentand the day on which the relevant Note Certificate is surrendered (or, in the case of part payment only, endorsed)at the Specified Office of a Paying Agent and (ii) (in the case of payments of interest payable other than onredemption) on the due date for payment. A Holder of a Registered Note shall not be entitled to any interest orother payment in respect of any delay in payment resulting from (A) the due date for a payment not being aPayment Business Day or (B) a cheque mailed in accordance with this Condition 11 arriving after the due datefor payment or being lost in the mail.

(e) Partial payments: If a Paying Agent makes a partial payment in respect of any Registered Note, the Issuer shallprocure that the amount and date of such payment are noted on the Register and, in the case of partial paymentupon presentation of a Note Certificate, that a statement indicating the amount and the date of such payment isendorsed on the relevant Note Certificate.

(f) Record date: Each payment in respect of a Registered Note will be made to the person shown as the Holder inthe Register at the opening of business in the place of the Registrar’s Specified Office on the fifteenth day beforethe due date for such payment (the “Record Date”). Where payment in respect of a Registered Note is to bemade by cheque, the cheque will be mailed to the address shown as the address of the Holder in the Register atthe opening of business on the relevant Record Date.

12. Taxation

(a) Gross up: All payments of principal and interest in respect of the Notes and the Coupons by or on behalf of theIssuer shall be made free and clear of, and without withholding or deduction for or on account of, any presentor future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected,withheld or assessed by or on behalf of the Republic of Lithuania or any political subdivision therein or anyauthority therein or thereof having power to tax, unless the withholding or deduction of such taxes, duties,assessments, or governmental charges is required by law. In that event, the Issuer shall pay such additionalamounts as will result in receipt by the Noteholders and the Couponholders after such withholding or deduction

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of such amounts as would have been received by them had no such withholding or deduction been required,except that no such additional amounts shall be payable in respect of any Note or Coupon:

(i) held by or on behalf of a Holder which is liable to such taxes, duties, assessments or governmental chargesin respect of such Note or Coupon by reason of its having some connection with the jurisdiction by whichsuch taxes, duties, assessments or charges have been imposed, levied, collected, withheld or assessedother than the mere holding of the Note or Coupon;

(ii) where the relevant Note or Coupon or Note Certificate is presented or surrendered for payment more than30 days after the Relevant Date except to the extent that the Holder of such Note or Coupon would havebeen entitled to such additional amounts on presenting or surrendering such Note or Coupon or NoteCertificate for payment on the last day of such period of 30 days; or

(iii) required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of1986 (the “Code”) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, anyregulations or agreements thereunder, any official interpretations thereof, or any law implementing anintergovernmental approach thereto.

(b) Taxing jurisdiction: If the Issuer becomes subject at any time to any taxing jurisdiction other than the Republicof Lithuania, references in these Conditions to the Republic of Lithuania shall be construed as references to theRepublic of Lithuania and/or such other jurisdiction.

Under current Lithuanian laws and regulations, interest (which also includes as interest, if applicable, thedifference between the redemption price and the issue price of the Notes) payments under the Notes to individuals(non-tax residents of Lithuania) are subject to withholding tax at a rate of 15 per cent. (unless a double taxtreaty with the Republic of Lithuania provides for a lower tax rate) and interest payments under the Notes toentities residing outside of the EEA or in countries which do not benefit from a double tax treaty with theRepublic of Lithuania are subject to Lithuanian withholding tax at a rate of 10 per cent.

13. Events of Default

If any of the following events occurs and is continuing:

(a) Non-payment: the Issuer fails to pay any amount of principal in respect of the Notes on the due date for paymentthereof or fails to pay any amount of interest in respect of the Notes on the due date for payment thereof andthe default continues for a period of five days in the case of principal and for a period of 14 days in the case ofinterest; or

(b) Breach of other obligations: the Issuer defaults in the performance or observance of any of its other obligationsunder or in respect of the Notes and such default is not capable of remedy or remains unremedied for at least30 days after written notice thereof, addressed to the Issuer by any Noteholder, has been delivered to the Issueror to the Specified Office of the Fiscal Agent; or

(c) Cross-default of Issuer or Material Subsidiary:

(i) any Indebtedness of the Issuer or any of its Material Subsidiaries is not paid when due or (as the case maybe) within any originally applicable grace period;

(ii) any such Indebtedness becomes due and payable prior to its stated maturity otherwise than at the optionof the Issuer or (as the case may be) the relevant Material Subsidiary or (provided that no event of default,howsoever described, has occurred) any Person entitled to such Indebtedness; or

(iii) the Issuer or any of its Material Subsidiaries fails to pay when due any amount payable by it under anyGuarantee of any Indebtedness;

provided that the amount of Indebtedness referred to in sub-paragraph (i) and/or sub-paragraph (ii) aboveand/or the amount payable under any Guarantee referred to in sub-paragraph (iii) above individually orin the aggregate exceeds EUR 50,000,000 (or its equivalent in any other currency or currencies); or

(d) Unsatisfied judgment: one or more judgment(s) or order(s) for the payment of any amount in excess ofEUR 50,000,000 (or its equivalent in any other currency or currencies) is rendered against the Issuer or any ofits Material Subsidiaries and continue(s) unsatisfied and unstayed for a period of 60 days after the date(s) thereofor, if later, the date therein specified for payment; or

(e) Security enforced: a secured party takes possession, or a receiver, manager or other similar officer is appointed,of the whole or any substantial part of the undertaking, assets and revenues of the Issuer or any of its MaterialSubsidiaries; or

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(f) Insolvency etc: (i) the Issuer or any of its Material Subsidiaries becomes insolvent or is unable to pay its debtsas they fall due, (ii) an administrator or liquidator is appointed (or application for any such appointment is made)in respect of the Issuer or any of its Material Subsidiaries or the whole or any substantial part of the undertaking,assets and revenues of the Issuer or any of its Material Subsidiaries, unless the petition to commence suchproceedings or procedure is discharged, stayed or dismissed within 60 days of such commencement, (iii) theIssuer or any of its Material Subsidiaries takes any action for a readjustment or deferment of any of its obligationsor makes a general assignment or an arrangement or composition with or for the benefit of its creditors ordeclares a moratorium in respect of any of its Indebtedness or any Guarantee of any Indebtedness given by itor (iv) the Issuer or any of its Material Subsidiaries ceases or threatens to cease to carry on all or any substantialpart of its business (save for the purposes of a Permitted Restructuring); or

(g) Winding up etc: an order is made or an effective resolution is passed for the winding up, liquidation or dissolutionof the Issuer or any of its Material Subsidiaries (save for the purposes of a Permitted Restructuring); or

(h) Analogous event: any event occurs which under the laws of the Republic of Lithuania has an analogous effectto any of the events referred to in paragraphs (d) to (g) above; or

(i) Failure to take action etc: any action, condition or thing at any time required to be taken, fulfilled or done inorder (i) to enable the Issuer lawfully to enter into, exercise its rights and perform and comply with its obligationsunder and in respect of the Notes, (ii) to ensure that those obligations are legal, valid, binding and enforceableand (iii) to make the Notes and the Coupons admissible in evidence in the courts of the Republic of Lithuaniais not taken, fulfilled or done; or

(j) Unlawfulness: it is or will become unlawful for the Issuer to perform or comply with any of its obligationsunder or in respect of the Notes,

then any Note may, by written notice addressed by the Holder thereof to the Issuer and delivered to the Issueror to the Specified Office of the Fiscal Agent, be declared immediately due and payable, whereupon it shallbecome immediately due and payable at its Early Termination Amount together with accrued interest (if any)without further action or formality.

14. Prescription

Claims for principal in respect of Bearer Notes shall become void unless the relevant Bearer Notes are presentedfor payment within ten years of the appropriate Relevant Date. Claims for interest in respect of Bearer Notes shallbecome void unless the relevant Coupons are presented for payment within five years of the appropriate RelevantDate. Claims for principal and interest on redemption in respect of Registered Notes shall become void unless therelevant Note Certificates are surrendered for payment within ten years of the appropriate Relevant Date.

15. Replacement of Notes and Coupons

If any Note, Note Certificate or Coupon is lost, stolen, mutilated, defaced or destroyed, it may be replaced at theSpecified Office of the Fiscal Agent, in the case of Bearer Notes, or the Registrar, in the case of Registered Notes(and, if the Notes are then admitted to listing, trading and/or quotation by any competent authority, stock exchangeand/or quotation system which requires the appointment of a Paying Agent or Transfer Agent in any particular place,the Paying Agent or Transfer Agent having its Specified Office in the place required by such competent authority,stock exchange and/or quotation system), subject to all applicable laws and competent authority, stock exchangeand/or quotation system requirements, upon payment by the claimant of the expenses incurred in connection withsuch replacement and on such terms as to evidence, security, indemnity and otherwise as the Issuer may reasonablyrequire. Mutilated or defaced Notes, Note Certificates or Coupons must be surrendered before replacements will beissued.

16. Agents

In acting under the Agency Agreement and in connection with the Notes and the Coupons, the Agents act solely asagents of the Issuer and do not assume any obligations towards or relationship of agency or trust for or with any ofthe Noteholders or Couponholders.

The initial Agents and their initial Specified Offices are listed below. The initial Calculation Agent (if any) is specifiedin the relevant Final Terms. The Issuer reserves the right at any time to vary or terminate the appointment of anyAgent and to appoint a successor fiscal agent or registrar or Calculation Agent and additional or successor payingagents; provided, however, that:

(a) the Issuer shall at all times maintain a fiscal agent and a registrar; and

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(b) if a Calculation Agent is specified in the relevant Final Terms, the Issuer shall at all times maintain a CalculationAgent; and

(c) if and for so long as the Notes are admitted to listing, trading and/or quotation by any competent authority,stock exchange and/or quotation system which requires the appointment of a Paying Agent and/or a TransferAgent in any particular place, the Issuer shall maintain a Paying Agent and/or a Transfer Agent having itsSpecified Office in the place required by such competent authority, stock exchange and/or quotation system.

Notice of any change in any of the Agents or in their Specified Offices shall promptly be given to the Noteholders.

17. Meetings of Noteholders; Modification and Waiver

(a) Meetings of Noteholders: The Agency Agreement contains provisions for convening meetings of Noteholdersto consider matters relating to the Notes, including the modification of any provision of these Conditions. Anysuch modification may be made if sanctioned by an Extraordinary Resolution. Such a meeting may be convenedby the Issuer and shall be convened by it upon the request in writing of Noteholders holding not less than one-tenth of the aggregate principal amount of the outstanding Notes. The quorum at any meeting convened to voteon an Extraordinary Resolution will be two or more Persons holding or representing one more than half of theaggregate principal amount of the outstanding Notes or, at any adjourned meeting, two or more Persons beingor representing Noteholders whatever the principal amount of the Notes held or represented; provided, however,that Reserved Matters may only be sanctioned by an Extraordinary Resolution passed at a meeting ofNoteholders at which two or more Persons holding or representing not less than three-quarters or, at anyadjourned meeting, one quarter of the aggregate principal amount of the outstanding Notes form a quorum. AnyExtraordinary Resolution duly passed at any such meeting shall be binding on all the Noteholders andCouponholders, whether present or not.

In addition, a resolution in writing signed by or on behalf of all Noteholders who for the time being are entitledto receive notice of a meeting of Noteholders will take effect as if it were an Extraordinary Resolution. Such aresolution in writing may be contained in one document or several documents in the same form, each signed byor on behalf of one or more Noteholders.

(b) Modification: The Notes, these Conditions and the Deed of Covenant may be amended without the consent ofthe Noteholders or the Couponholders to correct a manifest error. In addition, the parties to the AgencyAgreement may agree to modify any provision thereof, but the Issuer shall not agree, without the consent ofthe Noteholders, to any such modification unless it is of a formal, minor or technical nature or it is made tocorrect a manifest error.

18. Further Issues

The Issuer may from time to time, without the consent of the Noteholders or the Couponholders, create and issuefurther notes having the same terms and conditions as the Notes in all respects (or in all respects except for the firstpayment of interest) so as to form a single series with the Notes.

19. Notices

(a) Bearer Notes: Notices to the Holders of Bearer Notes shall be valid if published in a leading English languagedaily newspaper published in London (which is expected to be the Financial Times) and, if the Bearer Notesare admitted to trading on the Luxembourg Stock Exchange and it is a requirement of applicable law orregulations, a leading newspaper having general circulation in Luxembourg (which is expected to beLuxemburger Wort) or published on the website of the Luxembourg Stock Exchange (www.bourse.lu) or ineither case, if such publication is not practicable, in a leading English language daily newspaper having generalcirculation in Europe. Any such notice shall be deemed to have been given on the date of first publication (orif required to be published in more than one newspaper, on the first date on which publication shall have beenmade in all the required newspapers). Couponholders shall be deemed for all purposes to have notice of thecontents of any notice given to the Holders of Bearer Notes.

(b) Registered Notes: Notices to the Holders of Registered Notes shall be sent to them by first class mail (or itsequivalent) or (if posted to an overseas address) by airmail at their respective addresses on the Register and, ifthe Registered Notes are admitted to trading on the Luxembourg Stock Exchange and it is a requirement ofapplicable law or regulations, notices to Noteholders will be published on the date of such mailing in a leadingnewspaper having general circulation in Luxembourg (which is expected to be Luxemburger Wort) or publishedon the website of the Luxembourg Stock Exchange (www.bourse.lu) or in either case, if such publication is not

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practicable, in a leading English language daily newspaper having general circulation in Europe. Any suchnotice shall be deemed to have been given on the fourth day after the date of mailing.

20. Currency Indemnity

If any sum due from the Issuer in respect of the Notes or the Coupons or any order or judgment given or made inrelation thereto has to be converted from the currency (the “first currency”) in which the same is payable underthese Conditions or such order or judgment into another currency (the “second currency”) for the purpose of(a) making or filing a claim or proof against the Issuer, (b) obtaining an order or judgment in any court or othertribunal or (c) enforcing any order or judgment given or made in relation to the Notes, the Issuer shall indemnifyeach Noteholder, on the written demand of such Noteholder addressed to the Issuer and delivered to the Issuer orto the Specified Office of the Fiscal Agent, against any loss suffered as a result of any discrepancy between (i) therate of exchange used for such purpose to convert the sum in question from the first currency into the second currencyand (ii) the rate or rates of exchange at which such Noteholder may in the ordinary course of business purchase thefirst currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of anysuch order, judgment, claim or proof.

This indemnity constitutes a separate and independent obligation of the Issuer and shall give rise to a separate andindependent cause of action.

21. Rounding

(a) For the purposes of any calculations referred to in these Conditions (unless otherwise specified in theseConditions or the relevant Final Terms), (a) all percentages resulting from such calculations will be rounded, ifnecessary, to the nearest one hundred-thousandth of a percentage point (with 0.000005 per cent. being roundedup to 0.00001 per cent.), (b) all United States dollar amounts used in or resulting from such calculations will berounded to the nearest cent (with one half cent being rounded up), (c) all Japanese Yen amounts used in orresulting from such calculations will be rounded downwards to the next lower whole Japanese Yen amount,and (d) all amounts denominated in any other currency used in or resulting from such calculations will berounded to the nearest two decimal places in such currency, with 0.005 being rounded upwards.

22. Governing Law and Jurisdiction

(a) Governing law: The Notes and any non-contractual obligations arising out of or in connection with the Notesare governed by English law.

(b) English courts: The courts of England have exclusive jurisdiction to settle any dispute (a “Dispute”) arisingout of or in connection with the Notes (including any non-contractual obligation arising out of or in connectionwith the Notes).

(c) Appropriate forum: The Issuer agrees that the courts of England are the most appropriate and convenient courtsto settle any Dispute and, accordingly, that it will not argue to the contrary.

(d) Rights of the Noteholders to take proceedings outside England: Notwithstanding Condition 22(b) (Englishcourts), any Noteholder may take proceedings relating to a Dispute (“Proceedings”) in any other courts withjurisdiction. To the extent allowed by law, Noteholders may take concurrent Proceedings in any number ofjurisdictions.

(e) Service of process: The Issuer agrees that the documents which start any Proceedings and any other documentsrequired to be served in relation to those Proceedings may be served on it by being delivered to Law DebentureCorporate Services Limited at its registered office at Fifth Floor, 100 Wood Street, London EC2V 7EX, UnitedKingdom, or to such other person with an address in England or Wales and/or at such other address in Englandor Wales as the Issuer may specify by notice in writing to the Noteholders. Nothing in this paragraph shall affectthe right of any Noteholder to serve process in any other manner permitted by law. This Condition applies toProceedings in England and to Proceedings elsewhere.

(f) Waiver of immunity: To the extent that the Issuer has any immunity from the jurisdiction of any court or fromany process, the Issuer hereby irrevocably agrees not to claim, and hereby waives, any such immunity.

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FORM OF FINAL TERMS

Set out below is the form of Final Terms which will be completed for each Tranche of Notes issued under theProgramme.

[PROHIBITION OF SALES TO EEA RETAIL INVESTORS—The Notes are not intended, from 1 January2018, to be offered, sold or otherwise made available to and with effect from such date, should not be offered, soldor otherwise made available to any retail investor in the European Economic Area (“EEA”). For these purposes, aretail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) ofDirective 2014/65/EU (“MiFID II”) or (ii) a customer within the meaning of Directive 2002/92/EC (“IMD”), wherethat customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II.Consequently no key information document required by Regulation (EU) No 1286/2014 (the “PRIIPs Regulation”)for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been preparedand therefore offering or selling the Notes or otherwise making them available to any retail investor in the EEAmay be unlawful under the PRIIPs Regulation.][Include unless the Final Terms specifies “Prohibition of Sales toEEA Retail Investors” as “Not Applicable”]

Final Terms dated [●]

„Lietuvos energijaˮ, UAB(incorporated with limited liability in the Republic of Lithuania)

Issue of [Aggregate Nominal Amount of Tranche][Title of Notes]

under the EUR 1,000,000,000Euro Medium Term Note Programme

PART A—CONTRACTUAL TERMS

Terms used herein shall be deemed to be defined as such for the purposes of the Conditions (the “Conditions”) setforth in the Base Prospectus dated 27 June 2017 [and the supplement[s] dated [●] [and [●]] which [together]constitute[s] a base prospectus (the “Base Prospectus”) for the purposes of the Prospectus Directive. This documentconstitutes the Final Terms of the Notes described herein for the purposes of Article 5.4 of the Prospectus Directiveand must be read in conjunction with the Base Prospectus.

Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of theseFinal Terms and the Base Prospectus [as so supplemented]. The Base Prospectus [and the supplement(s) to it][is][are] available for viewing [at [website]] [and] during normal business hours at [address] [and copies may beobtained from [address]].

The expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010PD Amending Directive and the expression “2010 PD Amending Directive” means Directive 2010/73/EUprovided, however, that all references in this document to the “Prospectus Directive” in relation to any MemberState of the European Economic Area refer to Directive 2003/71/EC (and amendments thereto, including the 2010PD Amending Directive), and include any relevant implementing measure in the relevant Member State.

1. Issuer: „Lietuvos energijaˮ, UAB

2. (i) Series Number: [●]

[(ii) Tranche Number: [●]

[(iii) Date on which the Notes become fungible: [Not Applicable/The Notes shall be consolidated, form asingle series and be interchangeable for trading purposeswith the [●] on [[●]/the Issue Date/exchange of theTemporary Global Note for interests in the PermanentGlobal Note, as referred to in paragraph [22] below [whichis expected to occur on or about [●]].]

3. Specified Currency or Currencies: [●]

4. Aggregate Nominal Amount: [●]

[(i)] Series: [●]

[(ii) Tranche: [●]]

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5. Issue Price: [●]  per cent. of the Aggregate Nominal Amount [plusaccrued interest from [●]]

6. (i) Specified Denominations: [●] [and integral multiples of [●] in excess thereof up toand including [●]. No notes in definitive form will beissued with a denomination above [●]]

(If Notes are to be issued which have denominationsconsisting of a minimum Specified Denomination andhigher integral multiples of another smaller amount, thefollowing sample wording should be used (as adjusted forthe relevant Specified Currency and the actual SpecifiedDenominations):

EUR100,000 and integral multiples of EUR1,000 in excessthereof up to and including EUR199,000. No Notes indefinitive form will be issued with a denomination inexcess of EUR199,000.)

(ii) Calculation Amount: [●]

7. (i) Issue Date: [●]

(ii) Interest Commencement Date: [[●]/Issue Date/Not Applicable]

8. Maturity Date: [●]

9. Interest Basis: [[●] per cent. Fixed Rate]

[●] [●] [EURIBOR]/[LIBOR] +/– [●] per cent. FloatingRate]

[Zero Coupon]

(further particulars specified below in paragraph(s)[14/15/16])

10. Redemption/Payment Basis: Subject to any purchase and cancellation or earlyredemption, the Notes will be redeemed on the MaturityDate at [100]/[●] per cent. of their nominal amount.

11. Change of Interest or Redemption/Payment Basis: [Applicable/Not Applicable]

12. Put/Call Options: [Not Applicable]

[Investor Put]

[Change of Control Put]

[Issuer Call]

(See paragraph(s) [17/18/19] below)

13. (i) Status of the Notes: Senior

[(ii)] [Date [Board] approval for issuance ofNotes obtained]: [●]

PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE

14. Fixed Rate Note Provisions [Applicable/Not Applicable]

(i) Rate[(s)] of Interest: [The Initial Rate of Interest is] [●] per cent. per annumpayable in arrear on each Interest Payment Date

(ii) Interest Payment Date(s): [[●] [and [●]] in each year up to and including theMaturity Date]

(iii) Fixed Coupon Amount(s): [●] per Calculation Amount

(iv) Broken Amount(s): [●] per Calculation Amount, payable on the InterestPayment Date falling [in/on] [●]/[Not Applicable]

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(v) Day Count Fraction: [Actual/Actual (ICMA)/Actual/Actual (ISDA)/Actual/365(Fixed)/Actual/360/30/360/30E/360]

(vi) [Determination Dates: [●] in each year/[Not Applicable]]

15. Floating Rate Note Provisions [Applicable/Not Applicable]

(i) Specified Period: [●]

(ii) Specified Interest Payment Dates: [●] in each year

(iii) [First Interest Payment Date]: [●]

(iv) Business Day Convention: [Floating Rate Convention/Following Business DayConvention/Modified Following Business DayConvention/Preceding Business Day Convention/NoAdjustment]

(v) Additional Business Centre(s): [Not Applicable/[●]]

(vi) Manner in which the Rate(s) of Interest [Screen Rate Determination/ISDA Determination]is/are to be determined:

(vii) [Party responsible for calculating the [[●] shall be the Calculation Agent [name and address ofRate(s) of Interest and/or Interest Calculation Agent to be inserted]]Amount(s) (if not the Fiscal Agent):

(viii) Screen Rate Determination:

• Reference Rate: [●] [●] [EURIBOR]/[LIBOR]]

• Interest Determination Date(s): [●]

• Relevant Screen Page: [●]

• [Relevant Time: [●]

• Relevant Financial Centre: [●]]

(ix) ISDA Determination:

• Floating Rate Option: [●]

• Designated Maturity: [●]

• Reset Date: [●]

(x) Linear Interpolation: [Not Applicable/Applicable—the Rate of Interest for the[long/short] [first/last] Interest Period shall be calculatedusing Linear Interpolation]

(xi) Margin(s): [+/-][●] per cent. per annum

(xii) Minimum Rate of Interest: [●] per cent. per annum

(xiii) Maximum Rate of Interest: [●] per cent. per annum

(xiv) Day Count Fraction: [Actual/Actual (ICMA)/Actual/Actual (ISDA)/Actual/365(Fixed)/Actual/360/30/360/30E/360]

16. Zero Coupon Note Provisions [Applicable/Not Applicable]

(i) Accrual Yield: [●] per cent. per annum

(ii) Reference Price: [●]

(iii) Day Count Fraction in relation to early [Actual/Actual (ICMA)/Actual/Actual (ISDA)/Actual/365Redemption Amounts: (Fixed)/Actual/360/30/360/30E/360]

PROVISIONS RELATING TO REDEMPTION

17. Call Option [Applicable/Not Applicable]

(i) Optional Redemption Date(s): [●]

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(ii) Optional Redemption Amount(s) of [[●] per Calculation Amount/Make Whole Redemptioneach Note: Amount]

[(a) Benchmark Security(ies): [●]

[(b) Reference Time: [●]

[(c) Make-Whole Margin: [●] per cent.

[(d) Par Redemption Date: [[●] [Not Applicable]]

[(e) Linear Interpolation: [Applicable/Not Applicable]

(iii) If redeemable in part:

(a) Minimum Redemption Amount: [●] per Calculation Amount

(b) Maximum Redemption Amount [●] per Calculation Amount

(iv) Notice period: [●]

18. Put Option [Applicable/Not Applicable]

(i) Optional Redemption Date(s): [●]

(ii) Optional Redemption Amount(s) of eachNote: [●] per Calculation Amount

(iii) Notice period: [●]

19. Change of Control Put Option: [Applicable/Not Applicable]

20. Final Redemption Amount of each Note [[●] per Calculation Amount/Not Applicable]

21. Early Redemption Amount

[[●] per Calculation Amount/Not Applicable]

GENERAL PROVISIONS APPLICABLE TO THE NOTES

22. Form of Notes: [Bearer Notes:]

[Temporary Global Note exchangeable for a PermanentGlobal Note which is exchangeable for Definitive Noteson [●] days’ notice/at any time/in the limitedcircumstances specified in the Permanent Global Note]

[Temporary Global Note exchangeable for DefinitiveNotes on [●] days’ notice]

[Permanent Global Note exchangeable for DefinitiveNotes on [●] days’ notice/at any time/in the limitedcircumstances specified in the Permanent Global Note]

(N.B. The exchange upon notice/at any time optionsshould not be expressed to be applicable if the SpecifiedDenomination of the Notes includes language substantiallyto the following effect: “EUR100,000 and integralmultiples of EUR1,000 in excess thereof up to andincluding EUR199,000”. Furthermore, such SpecifiedDenomination construction is not permitted in relation toany issuance of Notes which is to be represented on issueby Permanent Bearer Global Notes exchangeable forDefinitive Notes.)

[Registered Notes:]

Global Registered Note registered in the name of anominee for [a common depositary for Euroclear and

Early Redemption Amount(s) per CalculationAmount payable on redemption for taxationreasons or on event of default or other earlyredemption:

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Clearstream, Luxembourg/a common safekeeper forEuroclear and Clearstream, Luxembourg (that is, heldunder the New Safekeeping Structure (NSS))]

23. New Global Note: [Yes] [No] [Not Applicable]

24. Additional Financial Centre(s): [Not Applicable/[●]]

25. [Yes/No. As the Notes have more than 27 couponpayments, talons may be required if, on exchange intodefinitive form, more than 27 coupon payments are left.]

THIRD PARTY INFORMATION

[[●] has been extracted from [●].] The Issuer confirms that such information has been accurately reproduced andthat, so far as it is aware, and is able to ascertain from information published by [●], no facts have been omittedwhich would render the reproduced information inaccurate or misleading.

Signed on behalf of „LIETUVOS ENERGIJAˮ, UAB:

By: .....................................................................Duly authorised

Talons for future Coupons to be attached toDefinitive Notes (and dates on which suchTalons mature):

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PART B—OTHER INFORMATION

1. LISTING AND ADMISSION TO TRADING

(i) Listing: [Official List of the Luxembourg StockExchange/[●]/None]

(ii) Admission to Trading: [Application [has been] [is expected to be made] by theIssuer (or on its behalf) for the Notes to be admitted totrading on [the Regulated Market of the LuxembourgStock Exchange [Green Exchangesegment]]]/[●]/[Nasdaq Vilnius Stock Exchange] witheffect from [●].] [Not Applicable.]

(iii) Estimate of total expenses related to [●]admission to trading:

2. RATINGS The Notes to be issued [[have been/are expected to be]rated]/[are unrated]:

Ratings: [Standard & Poor’s: [●]]

[Moody’s: [●]]

[Fitch: [●]]

[●]

[[●] is established in the EEA and registered underRegulation (EU) No 1060/2009, as amended (the “CRARegulation”).]

[[●] is established in the EEA and has applied forregistration under Regulation (EU) No 1060/2009, asamended (the “CRA Regulation”), although notificationof the corresponding registration decision has not yet beenprovided by the [relevant competent authority]/[EuropeanSecurities and Markets Authority].]

[[●] is established in the EEA and is neither registered norhas it applied for registration under Regulation (EU)No 1060/2009, as amended (the “CRA Regulation”).]

[[●] is not established in the EEA but the rating it hasgiven to the Notes is endorsed by [●], which is establishedin the EEA and registered under Regulation (EU) No1060/2009, as amended (the “CRA Regulation”).]

[[●] is not established in the EEA but is certified underRegulation (EU) No 1060/2009, as amended (the “CRARegulation”).]

[[●] is not established in the EEA and is not certified underRegulation (EU) No 1060/2009, as amended (the “CRARegulation”) and the rating it has given to the Notes is notendorsed by a credit rating agency established in the EEAand registered under the CRA Regulation.]

3. INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE/OFFER

[Save for any fees payable to the [Dealers], so far as the Issuer is aware, no person involved in the offer of theNotes has an interest material to the offer. The [Dealers] and their affiliates have engaged, and may in the futureengage, in investment banking and/or commercial banking transactions with, and may perform other servicesfor, the Issuer and its affiliates in the ordinary course of business.]/[●]/[Not Applicable]

4. REASONS FOR THE OFFER [See “Use of Proceeds” wording in Base Prospectus.] [TheNotes are intended to be issued as Green Bonds, [furtherparticulars to be provided].]

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5. Fixed Rate Notes only—YIELD [Applicable/Not Applicable]

Indication of yield: [●]

[The yield is calculated at the Issue Date on the basis ofthe Issue Price. It is not an indication of future yield.]

6. Floating Rate Notes only—HISTORIC [Applicable/Not Applicable]INTEREST RATES

Details of historic [LIBOR/EURIBOR] rates can be obtained from Reuters.

7. OPERATIONAL INFORMATION

ISIN: [●]

Common Code: [●]

Delivery Delivery [against/free of] payment

Names and addresses of additional Paying [●]Agent(s) (if any):

[Yes. Note that the designation “yes” simply means thatthe Notes are intended upon issue to be deposited with oneof the ICSDs as common safekeeper[, and registered in thename of a nominee of one of the ICSDs acting as commonsafekeeper,] and does not necessarily mean that the Noteswill be recognised as eligible collateral for Eurosystemmonetary policy and intra day credit operations by theEurosystem either upon issue or at any or all times duringtheir life. Such recognition will depend upon the ECBbeing satisfied that Eurosystem eligibility criteria havebeen met.]/

[No. Whilst the designation is specified as “no” at the dateof these Final Terms, should the Eurosystem eligibilitycriteria be amended in the future such that the Notes arecapable of meeting them the Notes may then be depositedwith one of the ICSDs as common safekeeper [, andregistered in the name of a nominee of one of the ICSDsacting as common safekeeper,]. Note that this does notnecessarily mean that the Notes will then be recognised aseligible collateral for Eurosystem monetary policy andintra day credit operations by the Eurosystem at any timeduring their life. Such recognition will depend upon theECB being satisfied that Eurosystem eligibility criteriahave been met.]

8. DISTRIBUTION

(i) Method of distribution: [Syndicated/Non-syndicated]

(ii) If syndicated: [Not Applicable/give names]

(a) Names of Dealers: [●]

(b) Date of subscription agreement: [●]

(c) Stabilising Manager(s) (if any): [Not Applicable/[●]]

(iii) If non-syndicated, name Dealer: [Not Applicable/give name]

(iv) Prohibition of Sales to EEA Retail Investors: [Applicable/Not Applicable]

(v) US Selling Restrictions: [Reg. S Compliance Category 1]; [TEFRA C/TEFRAD/TEFRA not applicable]

Intended to be held in a manner which wouldallow Eurosystem eligibility:

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USE OF PROCEEDS

The Issuer will use the net proceeds from the issue of each Series of Notes for its general corporate purposes or asmay otherwise be disclosed in the Final Terms.

Notes may be issued as green bonds (“Green Bonds”) and the relevant Final Terms will indicate whether or not theNotes are intended to constitute Green Bonds and will provide additional information in relation to the intendeduse of proceeds in respect of any Green Bonds.

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DESCRIPTION OF THE GROUP

Overview

Lietuvos energija, UAB (the “Issuer”) together with its 22 directly and indirectly controlled subsidiaries (the“Group”) is one of the largest state-owned energy companies in the Baltic countries. The Group’s core businessactivities are the distribution of electricity and gas, the generation of electricity and heat, and the trading and supplyof electricity and gas. According to the Coface CEE TOP 500 companies report (August 2016), the Group is thelargest utility company in Lithuania on the basis of revenues, and one of the largest groups of companies in Lithuaniaon the basis of revenues. The Group is the primary distributor of electricity in Lithuania. For the year ended31 December 2016, the Group generated sales revenues of EUR 1,101.630 million, adjusted EBITDA of EUR254.515 million and a net profit of EUR 118.438 million. As at 31 December 2016, the Group had total assets ofEUR 2,432.152 million and total equity (net assets) of EUR 1,319.547 million. As at 31 December 2016, the Grouphad 4,859 employees.

The Group’s three principal business segments are (i) distribution, which involves the distribution and public supplyof electricity and distribution of gas, (ii) electricity generation and (iii) trading and supply of electricity and gas,which together represented 97.7 per cent. of the Group’s revenue in the year ended 31 December 2016. Revenuefrom the distribution and public supply of electricity and distribution of gas represented 51.1 per cent. of the Group’srevenue in the year ended 31 December 2016. Revenue from electricity generation represented 14.6 per cent. of theGroup’s revenue in the year ended 31 December 2016. Revenue from the trading and supply of electricity and gasrepresented 32.0 per cent. of the Group’s revenue in the year ended 31 December 2016. The Group’s remainingrevenue is principally generated from Group companies which provide support services to its principal businesses,including maintenance, repair and construction of the Group’s energy facilities and the electricity distributionnetwork in Lithuania, the provision of information technology, real estate management and transport services.

Since 2013, the Group has reorganised its corporate structure, operations and governance model in order to enhancethe value of the Group, improve its operational efficiency and improve the quality of service to its customers. Aspart of this process, the Group’s electricity and gas distribution activities were merged and transferred to a newcompany, AB „Energijos Skirstymo Operatorius” (“ESO”), the Group’s electricity generation activity wasconcentrated in LEG and its electricity trading and supply activities were concentrated in Energijos Tiekimas UAB(“Energijos Tiekimas”). The Group’s gas trading and supply activities remain separated in LITGAS and UAB„Lietuvos Dujų Tiekimas” (“LDT”). The Group also transferred its electricity and gas customer service activitiesto a joint service centre known as Gile, which is managed by its subsidiary UAB Verslo Aptarnavimo Centras(“VAC”) and its contracting activities to a new wholly-owned entity, UAB Energetikos Paslaugu ir RangosOrganizacija (“EnePRO”). The Group is planning to divest its non-core activities conducted through VšĮ EnergetikuMokymo Centras (“EMC”), NT Valdos, UAB (“NTV”) and UAB Duomenų logistikos centras (“DLC”), if marketconditions are favourable.

The principal operating companies within the Group are ESO and LEG. ESO distributes electricity and gas toconsumers in Lithuania. The Group is the primary distributor of electricity in Lithuania. The Group’s electricitydistribution network covers the entire territory of Lithuania and the Group provides and operates approximately8.5 thousand kilometres of gas distribution pipelines. LEG owns and operates 3 power plants located in andconnected to the transmission system in Lithuania, which generate electricity predominantly from gas, oil and hydropower. The Group also owns wind farms in Lithuania and Estonia. The Group’s subsidiary, Energijos Tiekimas,supplies electricity procured by its trading business to consumers in Lithuania and, to a lesser extent, to consumersin Latvia and Estonia and ESO is responsible for the public supply of electricity in Lithuania. In addition, the Groupsupplies gas to consumers through its subsidiaries LDT and LITGAS. The Group’s electricity trading business isconducted through Energijos Tiekimas and consists of: (i) planning and optimisation of LEG’s generation capacityand sales of electricity generated by LEG; (ii) purchasing electricity for its consumer supply business; and (iii)hedging and proprietary wholesale trading. Planning electricity generation capacity involves providing power plantswith a schedule of how much electricity is required to be produced by that power plant and coordinating with theTSO in respect of electricity sold. Optimisation of electricity generation capacity involves determining the mostfinancially beneficial method of selling available generation capacity taking into account restrictions such asavailability of fuel sources (including gas and water) and environmental restrictions. The Group’s gas tradingbusiness, operated through LDT and LITGAS, purchases and sells gas and energy commodities on wholesalemarkets.

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The table below sets forth certain information relating to the Group’s distribution, generation and trading and supplybusinesses for the year ended 31 December 2016.

For the year ended 31 December 2016––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Installedelectricity Electricity generation distributed to Gas distributed Electricity Electricity sold Gas sold capacity consumers to consumers generated to consumers to consumers

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

(MW) (TWh) (TWh) (TWh) (TWh) (TWh)2,098.1 8.98 7.39 1.49 4.79 11.80

The Issuer was incorporated as a joint stock company under the laws of Lithuania on 28 August 2008 and registeredwith Register of Legal Entities, State Enterprise, the Centre of Registers with company no. 301844044. Its registeredhead office is located at Žvejų g. 14, LT- 09310, Vilnius, Republic of Lithuania, and the telephone number of itsregistered head office is + 370 5 278 2998. As of 31 December 2016, the Issuer had a registered share capital ofEUR 1,212.156 million and was solely owned by Lithuania represented by the Ministry of Finance of the Republicof Lithuania.

History and Development of the Group

Principal events during the Group’s history and development include:

1995 On 4 December 1995, AB „Lietuvos energija” was registered. More than 90 per cent. of shares wereowned by the State. The company consisted of electricity transmission and distribution networks, fourelectricity power plants (Lietuvos elektrinė, Mažeikiai TE, Kaunas HPP and Kruonis PSHP), heatingnetworks, two thermal power plants located in Vilnius and Kaunas and energy construction and servicessubsidiaries.

1997 On 8 April 1997, the Parliament of Lithuania enacted the law regarding the reorganisation of AB „Lietuvosenergija”. On 1 July 1997, the heating networks and thermal power plants of Vilnius and Kaunas wereseparated from AB „Lietuvos energija” and transferred to municipalities.

2001 On 31 December 2001, distribution companies AB Rytų Skirstomieji Tinklai, AB Vakarų SkirstomiejiTinklai (later renamed to AB VST) and electricity generation companies, AB Lietuvos Elektrinė and ABMažeikių Elektrinė were established by separating assets from AB „Lietuvos energija”. AB „Lietuvosenergija” remained only as a TSO but also retained hydro generation capacities of Kaunas HPP andKruonis PSHP.

2008 On 20 May 2008, a new company LEO LT, AB was set up for the purpose of constructing a nuclear powerplant. 61.7 per cent. of LEO LT, AB shares were owned by the Government and the remaining 38.3 percent. were owned by private company UAB NDX Energija. LEO LT, AB owned AB „Lietuvos energija”,AB Rytų Skirstomieji Tinklai (contributed by the State) and a private company AB VST (contributed byUAB NDX Energija). On 28 August 2008, LEO LT, AB set up a new subsidiary UAB Visagino AtominėElektrinė to carry out preparatory works ahead of the construction of the nuclear power plant.

2009 On 14 September 2009, the Parliament of Lithuania decided to liquidate LEO LT, AB. UAB NDX Energijasold AB VST shares back to the State.

On 22 October 2009, AB „Lietuvos energija” set up its new subsidiary LITGRID UAB which took overthe function of TSO from AB „Lietuvos energija”.

2010 For the purpose of execution of the energy sector’s reorganisation plan (which was approved by theGovernment in 2010) and implementation of the provisions of the Third Energy Package of the E.U., theshare capital of UAB Visagino Atominė Elektrinė was increased in 2010. On 4 June 2010, LEO LT, AB(a company in liquidation) paid for a part of such shares by contributing the shares of entities controlledby it (AB VST and AB Rytų Skirstomieji Tinklai) and the majority of shares owned by it in AB „Lietuvosenergija”. The remainder of UAB Visagino Atominė Elektrinė shares were acquired by the Governmentby contributing the shares of AB Lietuvos Elektrinė and certain non-current assets.

On 27 December 2010, AB VST and AB Rytų Skirstomieji Tinklai were merged and registered as a newcompany, AB LESTO.

2011 The merger of two companies—AB „Lietuvos energija” and AB Lietuvos Elektrinė in 2011 marked theend of the process of formation of the Group’s power generation unit. The new company Lietuvos energija,AB officially started operations on 1 August 2011.

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On 21 October 2011, the Ministry of Energy of the Republic of Lithuania became a sole shareholder ofUAB Visagino Atominė Elektrinė after the liquidation of LEO LT, AB.

2012 On 26 September 2012 the shares of UAB Visagino Atominė Elektrinė were transferred under the rightof trust to the possession of the Ministry of Economy of the Republic of Lithuania.

On 26 September 2012, the implementation of the provisions of the Third Energy Package of the EuropeanParliament in the Lithuanian electricity sector was finalised. Shares of Litgrid AB, the TSO controlled bythe UAB Visagino Atominė Elektrinė were transferred to a newly established state-owned private limitedliability company EPSO-G, controlled by the Ministry of Energy of the Republic of Lithuania.

2013 On 26 February 2013, the shares of UAB Visagino Atominė Elektrinė were transferred to the Ministry ofFinance of the Republic of Lithuania.

On 5 August 2013, Lietuvos energija, AB was renamed to Lietuvos Energijos Gamyba, AB.

On 30 August 2013, the Group parent company UAB Visagino Atominė Elektrinė changed its name toLietuvos energija, UAB.

On 8 October 2013, Lietuvos energija, UAB paid up the newly issued shares of LITGAS and became anowner of 67 per cent. of LITGAS share capital.

2014 During February-June 2014, Lietuvos energija, UAB acquired 96.63 per cent. of shares in Lietuvos DujosAB (17.7 per cent. were transferred by the State, 38.9 per cent. were acquired from E.ON RuhrgasInternational and 40.03 per cent. were acquired through a tender offer (of which 37.1 per cent. was acquiredfrom OAO Gazprom)).

In November 2014, Lietuvos energija, UAB implemented the requirement of the Third Energy Packageof the E.U. regarding the unbundling of natural gas supply, trade and distribution activities by transferringthe natural gas supply activity from Lietuvos Dujos AB to the newly established subsidiary, LDT.

2015 On 10 April 2015, Lietuvos energija, UAB established two special purpose companies VilniausKogeneracinė Jėgainė UAB and Kauno Kogeneracinė Jėgainė UAB for the implementation of co-generation power plant projects in Vilnius and Kaunas.

2016 On 1 January 2016, LESTO AB and Lietuvos Dujos AB were reorganised by way of merger, as a resultof which a new entity Energijos Skirstymo Operatorius AB was established.

On 1 January 2016, Elektros Tinklo Paslaugos UAB and Kauno Energetikos Remontas UAB werereorganised by way of merger, as a result of which a new entity was established under the name ofEnergetikos Paslaugų ir Rangos Organizacija UAB.

On 21 January 2016, Lietuvos energija, UAB acquired two wind farms with the total installed capacity of42.3 MW: 24MW in Lithuania (UAB „Eurakras”) and 18.3MW in Estonia („Tuuleenergia” OU).

On 18 February 2016, Lietuvos energija, UAB established Energijos Sprendimų Centras UAB, with theobjective of developing energy efficiency improvement and renewable energy projects.

On 3 October 2016, Lietuvos energija, UAB acquired 33.3 per cent. of the shares of LITGAS from ABKlaipėdos Nafta and became the sole shareholder of the company.

Organisational Structure

As at the date of this Base Prospectus, the Group consisted of the Issuer and 22 fully consolidated subsidiaries. TheIssuer is the Group’s parent company and is responsible for the co-ordination of its activities and the transparentmanagement of the Group. Its objectives are to improve its operational efficiency in order to deliver competitiveservices to its customers and providing long-term value for its shareholder in a socially responsible manner. TheIssuer analyses the Group’s activities and performance, establishes operational guidelines and rules, and providescertain centralised support functions to the Group, including strategy and development, risk management, treasury,legal services, audit and human resources.

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The chart below sets out the Group’s corporate structure.

The chart below sets out each of the Group’s subsidiaries by reference to the operating segments within which itoperates.

Main activities––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Production Supply and trade Distribution Customer care Services–––––––––––––––––––––––––––– –––––––––––––––––––––––––––– –––––––––––––––––––––––––––– –––––––––––––––––––––––––––– ––––––––––––––––––––––––––––

Servicing Activities––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Corporate governance Shared services Non-core activities––––––––––––––––––––––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––

Pursuant to the Third Energy Package: (i) the distribution of electricity must be separate and independent from thetransmission, generation and sale of electricity; (ii) the distribution of gas must be separate and independent fromthe transmission and sale of gas; (iii) the transmission of electricity must be separate and independent from thegeneration and sale of electricity; and (iv) the transmission of gas must be separate and independent from the saleof gas (“unbundling”). Additionally, the separation of electricity generation and sale is considered beneficial for theelectricity market, see “Regulation—The Third Energy Package requirements and unbundling implementation innatural gas and electricity sector”. For more information on the unbundling of the Group’s activities, see “—Historyand Development of the Group” and “Regulation—Current structure of the transmission and distribution ofelectricity”.

Shareholder

The Republic of Lithuania is the sole shareholder of the Issuer. As at the date of this Base Prospectus, the Issuer isunaware of any plans that may result in a change of ownership. The Ministry of Finance holds all of the shares inthe Issuer on behalf of the Republic of Lithuania and, accordingly, is the registered shareholder of the Issuer in theState Register of Legal Entities (the “Shareholder”).

The relationship between the Shareholder and the Issuer is conducted primarily through members of the Issuer’sSupervisory Council. The Republic currently maintains three members on the Issuer’s Supervisory Council (fromthe Ministry of Finance, the Ministry of Economy and one representative from the Government) and the Republic

UAB EnergijosSprendimų CentrasUAB „Elektroniniųmokėjimų agentūra”

UAB VersloAptarnavimoCentras

AB „EnergijosSkirstymoOperatorius”

UAB „LietuvosDujų Tiekimas”UAB LITGASEnergijos Tiekimas UAB AB „EnergijosSkirstymoOperatorius”

„Lietuvos EnergijosGamyba”, ABEurakrasTuuleenergia

„Lietuvos energijaˮ, UAB UAB Technologijų Ir InovacijųCentrasUAB Verslo Aptarnavimo Centras

VšĮ Energetiku Mokymo CentrasUAB Energetikos Paslaugu irRangos OrganizacijaNT Valdos, UABUAB Duomenų logistikos centras

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implements its rights as shareholder through the Ministry of Finance. There are three independent members on theSupervisory Council. Additionally, the Chairman of the Supervisory Council is independent and, in the case ofequality of votes, has the deciding vote. Accordingly, the Republic cannot make unilateral decisions on theSupervisory Council. All members of the Supervisory Council are elected by the General Meeting of the shareholdersfor a term of four years, which is due to expire in July 2017, please see “Management—Supervisory Council”.

Certain activities planned by the Group, including mergers and acquisitions, establishment of new legal entities bythe Issuer (but not Group subsidiaries) and reorganisations or equity injections into the Group’s principal subsidiariesrequire the approval of the Government. As of the date of this Base Prospectus, the Government has not materiallyaltered any plan submitted by the Group. Additionally the Group is responsible for implementing certain energyprojects of national strategic value, including the development of two new co-generation plants in Vilnius andKaunas. The Group seeks to build sustainable value in the energy sector by promoting the development of thecountry’s economy and society. In December 2013, the Ministry of Finance prepared a “Letter of Expectations”addressed to the Issuer outlining its expectations as the Shareholder of the Issuer in relation to strategic direction,principal activities, management of the Group, efficiency, responsibility, accountability and values.

The Issuer is subject to a statutory requirement to pay dividends based on a percentage of the Group’s return onequity. The higher the Group’s return on equity, the lower the proportion of retained earnings that the Group isrequired to pay to the Shareholder. ESO and LEG, in turn, are required to pay dividends to the Issuer based on theirreturn on equity. The higher ESO or LEG’s return on equity, the lower the proportion of net profit that ESO andLEG are required to pay to the Shareholder. In 2016, the Issuer paid dividends to the Shareholder ofEUR 97.2 million, an increase of 68.2 per cent. from 2015 (EUR 57.8 million), and 295.1 per cent. from 2014(EUR 24.6 million). This increase was mainly due to the increase in the Group’s net profit in 2016 compared to2015. The Issuer is the largest contributor to the state budget among state-controlled companies in Lithuania.

In 2014 the Issuer received a EUR 32.6 million “payment in kind” equity injection, in the form of Lietuvos DujosAB shares from the Government. It is possible that support of this sort may also be provided in the future but thereis no commitment from the Shareholder to do this. The ability of the Government to support the Issuer and theGroup through subsidies, loans, capital or other financial injection is restricted by, and subject to, the relevant rulesregarding State Aid.

The Ministry of Energy previously determined that payments to LITGAS by electricity and heat producersperforming regulated activities prior to 2016 and PSO service fees paid to LEG would not be considered State Aidby the European Commission. In 2016, the Ministry of Energy informed the European Commission about legislativechanges regarding LNG Supplements and PSO service fees and started the pre-notification procedure with theEuropean Commission, please see “Risk Factors—State-aid notification risk”.

Principal Subsidiaries

ESO, 94.98 per cent. owned by the Issuer with the remainder of its shares listed on the main market of NasdaqVilnius Stock Exchange, was established on 1 January 2016 as part of the implementation of the Group’s corporatereorganisation as a result of which the electricity distribution activities of LESTO AB and the gas distributionactivities of Lietuvos Dujos AB were merged and transferred to ESO. ESO is the largest company on the NasdaqBaltic Market by market capitalisation. The main activities of ESO are distribution and public supply of electricity,natural gas distribution and the maintenance and development of electricity and gas distribution networks. ESO isthe primary distributor of electricity in Lithuania and serves approximately 1.6 million customers in Lithuania,which represents approximately 100 per cent. of consumers in Lithuania. ESO’s electricity distribution networkcomprises approximately 122,000 kilometres of lines, of which approximately 76 per cent. is comprised of overheadlines and approximately 24 per cent. is comprised of underground electricity cables. ESO’s gas distribution networkcomprises approximately 8,400 kilometres of pipelines. In 2016, ESO distributed 8.98 TWh of electricity, supplied3.15 TWh of electricity and distributed 7.39 TWh (691 million m3) of gas. In the year ended 31 December 2016,ESO contributed 64.2 per cent. of the Group’s adjusted EBITDA. For more information on the Group’s distributionbusiness, please see “—The Group’s Business—Distribution and Public Supply of Electricity and Distribution ofGas” below.

LEG, 96.75 per cent. owned by the Issuer with the remainder of shares listed on the main market of the NasdaqVilnius Stock Exchange, was established on 21 July 2011. LEG owns and operates three generation facilities: theElektrėnai Complex which, following the decommissioning of four units in 2014 and 2015, and excluding two unitswhich are inactive and are currently in the process of being decommissioned, now consists of two gas and oil-firedreserve power units (the “Reserve Power Plants”) and a combined cycle gas unit (“CCGT”); Kruonis PumpedStorage Hydroelectric Power Plant (“Kruonis PSHP”) which consists of four units, two of which operate as asecondary reserve; and Kaunas Algirdas Brazauskas Hydroelectric Power Plant (“Kaunas HPP”). In 2016, LEG

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produced 1.37 TWh of electricity. LEG also provides balancing services to the Lithuanian TSO LITGRID AB (the“TSO”), regulation power (as defined in the Glossary) and power reserve services. LEG’s activities are focused ontwo operating segments, regulated activities and commercial activities. Its regulated activities include power reserveservices and strategic power reserve services, including the Reserve Power Plant’s revenue from heat and electricitygeneration and balancing and regulation. Its commercial activities include electricity trading in the open market,electricity generation at Kaunas HPP and Kruonis PSHP, the related balancing and regulation services and certainother activities.

LEG is the sole provider of “secondary” power reserve services and also provides “tertiary” power reserve services.Tertiary and secondary reserves are intended to ensure the reliable operation of the national electricity system inemergencies when there is an unexpected reduction in electricity generation or unexpected increase in electricityconsumption. The secondary power reserve consists of power from installations or hydroelectric units which canbe activated within 15 minutes. The tertiary power reserve is derived from power-generating facilities which can beactivated within 12 hours. LEG provides secondary power reserve services at Kruonis PSHP and it provides thetertiary power reserve at the Reserve Power Plant at the Elektrėnai Complex. The units at the Reserve Power Plantsare only therefore activated when there is a shortfall in the amount of electricity in the system and LEG is instructedby the TSO to generate additional power, which is sold to the TSO. At the end of 2016, the Ministry of Energy andthe TSO decided that providers of tertiary power reserve services would be determined by an auction process,beginning in 2017. On 28 December 2016, the TSO announced that the provision of tertiary power reserve servicesin 2017 would be provided by LEG through its Reserve Power Plants in the Elektrėnai Complex. In addition, LEGprovides strategic power reserve services via the CCGT unit at the Elektrėnai Complex. The strategic power reserveis determined by the Government based on proposals from the Lithuanian Ministry of Energy. The aim of theseservices is to provide additional security in ensuring the reliable operation of the national electricity system. LEGreceives public service obligation (“PSO”) service fees for providing strategic power reserve services. PSO servicefees are the fees payable to the producers of electricity under a PSO scheme based on pre-determined annualquantities and prices of services set by the NCC. In the year ended 31 December 2016, PSO fees contributed 34 percent. of LEG’s EBITDA. In the year ended 31 December 2016, LEG contributed 22.8 per cent. of the Group’sadjusted EBITDA.

In 2016, the Elektrėnai Complex produced 0.49 TWh of electricity compared to 1.07 TWh in 2015. This reductionin the level of production was principally caused by the cancellation of production quotas for subsidised electricityproduction from the beginning of 2016 and the commencement of operations of two cross-border electricitytransmission lines between Klaipeda (Lithuania) and Nybro (Sweden) (known as the “NordBalt” interconnection)and between Alytus (Lithuania) and Elk (Poland) (known as the “LitPol” interconnection). However, during 2016,the secondary power reserve units of Kruonis PSHP were activated by the TSO on 58 occasions, compared to 20occasions in 2015, primarily as a result of unanticipated disconnections of the NordBalt interconnection. For moreinformation on the Group’s generation business, please see “—The Group’s Business—Electricity”.

Energijos Tiekimas, a wholly owned subsidiary of the Issuer was established on 21 October 2009. The main activitiesof Energijos Tiekimas are the supply and trading of electricity. Its core business is the independent supply ofelectricity, including supply of electricity to consumers, scheduling, forecasting, balancing, purchasing, sales,balancing energy, trade intermediation and import and export of electricity. Its trading activities consist of: (i)planning and optimisation of LEG’s generation capacity and sales of electricity generated by LEG; (ii) purchasingelectricity for its consumer supply business; and (iii) hedging and proprietary wholesale trading. The Group’s gastrading business, operated through LDT and LITGAS, purchases and sells gas and energy commodities on wholesalemarkets. Energijos Tiekimas is a member of the Nasdaq Commodities exchange and is the only Lithuanian electricitysupplier that actively participates on this exchange. Energijos Tiekimas is also a member of Nord Pool Exchange.Energijos Tiekimas owns Geton Energy OU, a company established in Estonia, Geton Energy SIA, a companyestablished in Latvia and Geton Energy Sp. z.o.o., a company established in Poland, that are engaged in powersupply and/or trading in Estonia, Latvia and Poland, respectively. According to the Group’s internal data, EnergijosTiekimas has the highest number of commercial customers, approximately 6,700, among independent electricitysuppliers in Lithuania, which represents approximately 42 per cent. of electricity consumers in Lithuania. In 2016,Energijos Tiekimas supplied 1.7 TWh of electricity. In 2016, Energijos Tiekimas entered into financial derivativestransactions on the Nasdaq Commodities exchange worth more than 8.7 TWh. In the year ended 31 December 2016,Energijos Tiekimas contributed 4.3 per cent. of the Group’s adjusted EBITDA. For more information on the Group’selectricity trading and supply business, please see “—The Group’s Business—Trading and Supply of Electricity andGas”.

LDT, a wholly owned subsidiary of the Issuer, was established on 2 September 2014. The main activities of LDTare the supply, purchase (import) and sale of natural gas to industrial and business companies and householdcustomers. LDT serves approximately 560,000 customers in Lithuania, which represents approximately 99 per cent.

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of gas consumers in Lithuania. In 2016, the company supplied 7.49 TWh of natural gas. In the year ended31 December 2016, LDT contributed 5.7 per cent. of the Group’s adjusted EBITDA. For more information on theGroup’s gas supply business, please see “—The Group’s Business—Trading and Supply of Electricity and Gas—Supply of Gas”.

LITGAS, wholly owned by the Issuer, was established on 17 December 2012. The main activities of LITGAS areLNG trading and the supply of natural gas through the liquefied natural gas (“LNG”) terminal in Klaipeda (althoughit does not own or operate the terminal). Since 2015, LITGAS has been the designated supplier of gas in Lithuaniaand is responsible for ensuring that a minimum quantity of gas is delivered through the Klaipėda LNG Terminal. In2016, LITGAS supplied 3.81 TWh of natural gas. The Group had intended to complete a merger between LDT andLITGAS on 1 January 2016 as part of the implementation of its corporate reorganisation. This merger was postponeduntil the finalisation of the legal and regulatory framework relating to the operation of the Klaipeda LNG terminaland the supply of natural gas from the LNG terminal.

In the year ended 31 December 2016, LITGAS contributed 0.7 per cent. of the Group’s adjusted EBITDA. For moreinformation on the Group’s gas trading and supply please see “—Trading and Supply of Electricity and Gas—Tradingof Gas” and “—Trading and Supply of Electricity and Gas—Supply of Gas”.

Competitive Strengths

The Group benefits from the following key strengths:

Strong and Stable Financial Position

The Group benefits from a strong and stable financial position as a result of its low level of indebtedness relative toits equity and the levels of profitability from its operating activities. As at 31 December 2016, the Group’s net debtto equity ratio was 23.9 per cent. (compared to 19.3 per cent. as at 31 December 2015). The Group’s net debt toadjusted EBITDA ratio for the year ended 31 December 2016 was 1.24 times compared to 1.17 times for the yearended 31 December 2015. It has also been able to make dividend payments to its shareholder in each of the last3 years, please see “—Shareholder”. For the year ended 31 December 2016, sales revenues exceeded EUR 1 billionfor the first time in its operating history. As a result, the Group has the financial capacity to invest in the maintenanceof its current services and network and to support the financing of its 2020 Strategy, including the acquisition anddevelopment of new wind farms and the construction of co-generation power plants, while at the same time retaininga relatively low debt level, please see “Description of Other Indebtedness”. In addition, the Group’s low debt levelgives the Issuer good access to financing.

Experienced and Dynamic Management Team and Structure

The Group has an experienced senior management team within the Issuer and at its principal operating subsidiaries.Since its establishment in 2013, Dr. Dalius Misiūnas has been the Chairman of the Board and Chief ExecutiveOfficer of the parent company. In 2016, Dr. Dalius Misiūnas was named as CEO of the Year for 2015 in Lithuaniaby the weekly magazine Veidas. This is the first time that this prestigious award has been awarded to the CEO of astate-owned company. Mr. Darius Kašauskas is a member of the Board of Directors and has been the Finance andTreasury Director of the Issuer since its establishment. In 2015, Mr. Darius Kašauskas was awarded the “CFO ofthe Year” in Lithuania by the Association of Financial Analysts and the Verslo Žinios newspaper.

The senior management team have been instrumental in the development of the Group’s strategy and delivering itshigh levels of profitability on a consistent basis over the last 3 years. As part of the Group’s 2020 Strategy, thegovernance structure of the Group has been substantially reorganised over the last 3 years. The Group has introduceduniform management and control policies, including integrated planning and monitoring systems across the Groupin order to facilitate operational efficiency and to benefit from synergies between Group companies. In 2013, 2014and 2015, the Group was recognised as the best managed state-owned entity in Lithuania by the Government’s state-owned enterprise monitoring and governance coordination unit (“Governance Coordination Centre”).

The Group’s Clearly Defined Strategy and Consistent Implementation has Contributed to Strong FinancialPerformance

Since 2014, the Group has been consistently and successfully implementing its 2020 Strategy. The main goal of thestrategy is to double the value of the Group by 2020. The Group has merged companies and combined operationsto benefit from synergies and has centralised Group support functions to reduce operating costs. See “—The Group’sStrategy”. The Group has improved its operational efficiency year on year since 2014. In 2016, the Group recordedits highest levels of revenue and net profit. Adjusted EBITDA for the year ended 31 December 2016 amounted toEUR 254.5 million (compared to EUR 215.7 million for the year ended 31 December 2015). The Group’s

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management believes that adopting and consistently implementing its clearly defined strategy has enabled it todeliver higher added value to customers and its Shareholder, to benefit from operational efficiencies and to deliverstrong sustainable financial results.

A Significant Proportion of the Group’s adjusted EBITDA is Generated by its Electricity and Gas DistributionBusiness

A significant proportion of the Group’s revenue and adjusted EBITDA is generated by its electricity and gasdistribution business which is operated by ESO. The electricity and gas distribution business provides predictableand stable cash flows. For the year ended 31 December 2016, the Group distributed 8.98 TWh of electricity toapproximately 1.6 million customers and electricity and gas distribution contributed 36.2 per cent. of the Group’srevenues and 64 per cent. of the Group’s adjusted EBITDA. Management believes that the stability of the Group’sprincipal revenue stream, which, as a natural monopoly within Lithuania, is not subject to competitive pressures,contributes significantly to the management of its overall risk profile and provides a solid basis for theimplementation of its investment programmes.

Wholly State-Owned Company, Backed by a Stable and Open Economy

The Republic of Lithuania, through the Ministry of Finance, owns 100 per cent. of the share capital of the Issuer,the parent company of the Group. Currently, Standard & Poor’s has assigned Lithuania a rating of A-/stable, Moody’shas assigned Lithuania a rating of A3/stable and Fitch Ratings has assigned Lithuania a rating of A-/stable. TheGroup’s management believes that being wholly-owned by a government that is backed by a stable and openeconomy provides additional credibility in the electricity and credit markets and allows it to benefit from morefavourable credit terms than competitors without similar ownership.

The Group’s Strategy

In 2014, the Group adopted its 2020 Strategy. Its 2020 Strategy set the “mission” of the Group to build sustainablevalue in the energy sector by promoting the development of the country’s economy and society. The Group’s “vision”is to become the energy company with the highest value, which the Group determines as its EBITDA multiplied byits enterprise value as a proportion of its EBITDA, in the Baltic States. The key objective of its 2020 Strategy is todouble the value of the Group by 2020 from the level at 2012. By 2015, the Group had achieved approximately41 per cent. of this target value and by 2016 it had achieved over 60 per cent. of this target value.

Its 2020 Strategy defines the following three fundamental strategic elements, which outline the Group’s operatingguidelines until 2020:

• Development: the Group intends to diversify its generation portfolio and invest in current activities, to developnew activities and acquire businesses operating in the energy industry. Development will be financed byoptimising the Group’s capital structure and matching investments with future cash flows. Development projectsare to be selected according to clear profitability criteria and having regard to national strategic priorities in theenergy sector.

• Efficiency: efficiency is to be achieved by centralising and optimising the ancillary functions of the Group’scompanies, by making progress in technology and innovation deployment, and by consistently improvingoperational processes. The Group’s objective is productivity growth, improvement of the quality of the services,and higher value added to consumers. The Group intends to focus on its main activities and seek to divest non-core businesses.

• Organisational development: the Group intends to create a distinctive organisational culture which promotesshared values, raises talents and provides on-going development opportunities. This will be achieved using the“Group Competency Model”, which assesses every employee of the Group to determine specific employeedevelopment actions. The selection of development actions is based on a “70/20/10” principle, whereapproximately 70 per cent. of the proposed development actions come from working experience and self-learning, 20 per cent. from managers and peers and 10 per cent. from specific formal training.

Organisational development will also be achieved using a three level training programme which includes: (i) aninduction programme; (ii) the Group’s internal training academy, which provides training in relation to mandatoryprofessional qualifications and certifications which employees are required to obtain; and (iii) a leadershipdevelopment program, which provides managers with 8 months of modular training. The Group has also investedin an e-learning platform enabling the organisation to access training resources remotely and promoting a unifiedapproach to learning.

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As part of the Group’s performance management process, it has developed a talent identification system whichhelps to identify employees with high potential and learning ability for career advancement with the aim ofdeveloping a deep talent pool of candidates for key positions within the Group.

In order to achieve the objectives required by the 2020 Strategy, the Group has implemented operational programmeswhich seek to ensure the provision of high quality services to customers. As a result of the implementation of theGroup’s strategy, its adjusted EBITDA has increased significantly to EUR 254.5 million in 2016. The Group’sadjusted EBITDA margin has also increased significantly to 23.1 per cent. in 2016.

In 2015, the Group implemented a corporate reorganisation programme known as “LE-START” designed to enhancethe value of the Group, improve the Group’s operational efficiency and improve the quality of service to the Group’scustomers. As part of this programme, the Group’s electricity and gas distribution activities were merged andtransferred to a new company, ESO. Under the programme, the Group also concentrated its electricity generationactivity in LEG by transferring its wholesale electricity trading activity from LEG to Energijos Tiekimas. Thisreorganisation also resulted in the concentration of the Group’s electricity trading and supply activities in EnergijosTiekimas. Currently, the Group’s gas trading and supply activities remain separated in LITGAS and LDT. The Groupalso transferred its electricity and gas customer service activities to a joint service centre known as “Gile”, whichis managed by its subsidiary, VAC. Gile services customers of ESO and LDT. Under the programme, the Group’scontracting operations (which consist primarily of the reconstruction, repair and technical maintenance of electricityequipment and power stations) were transferred from Elektros Tinklo Paslaugos and Kauno Energetikos Remontasand merged into a new company, EnePRO. The Group is planning to divest its non-core activities, which areconducted through EMC, NTV and DLC, if market conditions are favourable.

The Group plans to grow its distribution business and improve its operational efficiency by significantly modernisingits electricity distribution network. The Group is planning to invest EUR 1.7 billion in the modernisation and renewalof the electricity distribution network between 2015 and 2025. A significant proportion of this investment will seekto improve the resistance of the network to adverse weather conditions. This will involve the replacement of overheadlines with underground lines or isolated lines. The Group anticipates the main source of growth in its 2020 Strategywill come from these investments in its electricity distribution assets. The Group is in the process of reviewing itsplans to modernise its electricity distribution network and expects to complete this review in the third quarter of2017. It does not anticipate the total amount of its capital expenditure in respect of these plans to change significantly.However, the Group may change the amount of funds it will allocate for particular projects. The Group also plansto invest approximately EUR 141.1 million in its gas distribution network by 2025. The Group’s electricity and gassupply businesses in Lithuania are not expected to grow significantly in the next 4 years as a result of strongcompetition, market saturation, energy efficiency measures and lack of new customers. The Group plans to expandits trading and supply businesses by increasing the volume of energy derivative products that it trades and increasingtrading with and supply to Latvia and trading with Poland.

The Group plans to diversify its activities by investing approximately EUR 500 million between 2017 and 2020 inthe building of new co-generation plants, which are expected to be completed in 2019-2020. In 2014, the Groupstarted implementing its projects for the development of combined heat and power (“CHP”) production plants inVilnius and Kaunas. According to the resolution of the Government of the Republic of Lithuania of 28 May 2014,these projects were declared economic projects of state significance and the Issuer was assigned to hold not lessthan 51 per cent. of shares of the CHP plants in Vilnius and Kaunas. In 2015, the Group established two specialpurpose vehicles: one for project implementation of the CHP plant in Vilnius (UAB Vilniaus kogeneracinė jėgainė,Vilnius CHP plant), and the other for project implementation of the CHP plant in in Kaunas (UAB KaunoKogeneracinė Jėgainė, Kaunas CHP plant). The Group is developing the Kaunas CHP plant jointly with FortumHeat Lietuva, UAB, which owns 49 per cent. of the Kaunas CHP plant. The Group anticipates that the Vilnius CHPplant will be funded by the combination of a EUR 190 million loan facility provided by the European InvestmentBank, an E.U. grant for the Vilnius CHP plant (which will cover up to 40 per cent. of the capital expenditure for theVilnius CHP plant) and shareholders’ equity, while the Kaunas CHP plant will be funded via a commercial bankloan and shareholders’ equity. The Group intends that both projects’ share capital will be partly funded through theEurobond market, please see “Description of Other Indebtedness”.

In 2017, the Group anticipates that it will invest EUR 15 million in the Vilnius CHP plant and EUR 12.2 million inthe Kaunus CHP plant. In order to obtain the permit to connect the Vilnius CHP plant to the central heating networkand to obtain the municipality permit to increase the height of the Vilnius CHP plant, in May 2017 the Issuer signeda cooperation agreement with „Vilniaus šilumos tinklai“ to acquire an inactive gas-fired CHP power plant (with aninstalled heat generation capacity of 604 MW and an installed electricity generation capacity of 360 MW) forEUR 9.96 million and an option to acquire 5 per cent. of the shares in the Vilnius CHP plant, subject to approvalsfrom the European Commission, European Investment Bank and any other third parties, if required.

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The Group expects that the Vilnius CHP plant will have a total installed electricity generation capacity ofapproximately 87.6 MW and a total installed heat generation capacity of approximately 227 MW. It is expected thatthe Vilnius CHP plant will generate approximately 40 per cent. of the heat required by the Vilnius district. TheGroup expects that the Kaunus CHP plant will have a total installed electricity generation capacity of approximately24 MW and a total installed heat generation capacity of approximately 70 MW. It is expected that the Kaunus CHPplant will generate approximately 40 per cent. of the heat required by the Kaunus district. By generating both powerand heat, the CHP plants are expected to ensure lower heat production prices for consumers and additional electricityproduction capacities at a competitive price and contribute to solving waste handling problems by reducing theaccumulation of waste in landfills and reducing pollution of the environment. In 2016, the Group established aventure capital fund to fund start-up companies in the energy sector. The Group intends to invest approximatelyEUR 7 million in the fund (including all fees, expenses and acceleration costs) over an investment period of 5 years.This is the first energy sector venture capital fund in the Baltic countries.

The Group anticipates that part of its growth in value and EBITDA will come from renewable sources, primarilywind. The Group plans to develop its own wind farm near Kruonis and also plans to acquire wind power projectsat a stage when the necessary infrastructure for the installation of a wind farm has already been developed, whereland plots have been leased, connection to the power grid is present and territorial planning and public health andenvironmental requirements have been met. The progress of these developments depends significantly on the levelof subsidies that will be provided by the Government. In addition, the Group is also considering constructing a newunit in Kruonis PSHP.

The Group’s Business

The Group’s three principal business segments are:

• the distribution and public supply of electricity and distribution of gas;

• electricity generation; and

• trading and supply of electricity and gas.

Distribution and Public Supply of Electricity and Distribution of Gas

Distribution of electricity

The Group distributes electricity in Lithuania to approximately 1.6 million customers covering an area ofapproximately 65,300 square kilometres as of 31 December 2016. The Group is the primary distributor of electricityin Lithuania through its subsidiary ESO. ESO, which commenced operations on 1 January 2016, was formedfollowing the merger of LESTO AB (the electricity distribution network operator) and Lietuvos Dujos AB (the gasdistribution company). Revenue from the distribution of electricity is the largest single contributor to the Group’srevenue and EBITDA.

In the year ended 31 December 2016, the Group distributed 8.98 TWh of electricity to consumers compared to8.53 TWh for the year ended 31 December 2015. The Group does not currently distribute electricity to consumersin any other country. In the year ended 31 December 2016, approximately 31 per cent. of electricity distributed bythe Group was consumed by private residents, 28.6 per cent. by industrial customers and 11 per cent. by service-sector institutions. Both SAIDI and SAIFI, as both defined in the “Glossary”, have decreased in recent years from288.1 minutes and 1.83 units, respectively, in the year ended 31 December 2012 reflecting an improvement in thereliability of distribution and supply.

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The table below sets out the key operating indicators of ESO’s electricity distribution business as the dates indicated:

Key operating indicators of ESO2016 2015 Change

––––––––––– ––––––––––– ––––––––––––––––––––––

(TWh) (TWh) +/- %Operating IndicatorsDistributed electricity via medium and low voltage networks .........TWh 8.98 8.53 0.45 5.23Public and guaranteed supply of electricity ......................................TWh 3.15 3.12 0.03 0.84Supply quality indicators of the networkELECTRICITYSAIDI, (with force majeure)..............................................................min. 172.9 106.5 66.4 62.35SAIFI, (with force majeure) .............................................................units 1.25 1.06 0.19 17.92

More frequent natural disasters caused by extremely varied weather conditions had a significant impact on theoperation of the Group’s electricity distribution network in 2016. The storm of 17 to 25 June 2016, which was oneof the strongest in recent years, had the largest impact on the electricity network reliability indicators. The Group’sdistribution network losses were 629 million kWh of electricity or 6.55 per cent. of the amount of electricity receivedin the year ended 31 December 2016 compared to network losses of 6.80 per cent. in the year ended 31 December2015.

Electricity distribution investment plans

The Group is planning to significantly modernise its electricity distribution network and to invest EUR 1.7 billionin the modernisation and renewal of its network between 2015 and 2025. A significant proportion of this investment,approximately EUR 511 million, will seek to improve the resistance of the network to adverse weather conditions.This will involve the replacement of overhead lines with underground lines or isolated lines. Over the next 10 years,the portion of such lines is expected to increase from approximately 24 per cent. to 40 per cent. with plannedconstruction of underground and isolated lines spanning 18 thousand kilometres. The Group is in the process ofreviewing its plans to modernise its electricity distribution network and expects to complete this review in the thirdquarter of this year. It does not anticipate the total amount of its capital expenditure in respect of these plans tochange significantly, please see “—The Group’s Strategy”.

The Group also plans to invest up to EUR 426 million in its “Safe and Reliable Network” programme, which involvesthe replacement of unsafe transformers, cable lines and distribution devices and up to approximatelyEUR 130 million to improve the quality of the electricity supply voltage by fixing nearly 9.1 thousand kilometresof lines currently affected by voltage fluctuation. The Group plans to allocate EUR 34 million to implement smartgrid projects. Seven projects are expected to be implemented by 2025 including the automation of the grid, pilotprojects for smart reading devices, the creation of a single dispatcher centre and the installation of a system for themanagement of the distribution network. The remaining investments, approximately EUR 580 million, will beallocated to other measures including the connection of new customers.

Regulation of electricity distribution

The Group’s electricity distribution network is a natural monopoly within Lithuania and is therefore not subject todirect competition from other market participants. Electricity distribution is subject to a licensing regime in Lithuaniaand is regulated by the Lithuanian Law on Energy, the Lithuanian Law on Electricity and other regulatory legislation.Operating licences are issued and licensed activities are controlled by the NCC. The NCC sets price caps for theprovision of network services in the electricity sector for five year periods on the basis of a long-run averageincremental cost (“LRAIC”) model. The current regulatory period of five years sets the price caps for 2016 – 2020.For further information in relation to price regulation and the licensing regime, see “Regulation”.

Public Supply of Electricity

The Group supplies electricity to approximately 1.6 million customers in Lithuania. The electricity supply marketin Lithuania is fully liberalised. Consumers are able to choose to be supplied from independent electricity suppliers.However, it is not fully deregulated as consumers are also still able to rely on the Government to supply electricityat a regulated tariff. The public supply of electricity is conducted through ESO. As the principal public supplier,ESO supplies electricity to both regulated consumers on the basis of public tariffs and as a guaranteed supplier onthe basis of a guaranteed supply price set by the Law on Electricity. ESO provides a guaranteed electricity supplyto consumers who have not chosen an independent supplier or where an independent supplier fails to fulfil itsobligations. In the year ended 31 December 2016, ESO supplied 3.15 TWh of electricity to the public in Lithuania

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(approximately 99 per cent. of total electricity supplied to the public in Lithuania), representing an increase of0.8 per cent. compared to the year ended 31 December 2015.

Regulation of Public Supply

The public supply of electricity is subject to a licensing regime in Lithuania and is regulated by the Lithuanian Lawon Energy, the Lithuanian Law on Electricity and other regulatory legislation. The NCC sets price caps for the publicsupply services for five year periods on the basis of a reasonable return, regulatory depreciation and compensatedcost. The NCC also sets the purchase price of electricity on the basis of the difference between the public supplyprice and the actual electricity purchase price, taking into account any over-payment of tariffs in the previous period.The current regulatory period of five years sets the price caps for 2016 – 2020. For further information in relationto price regulation and the licensing regime, see “Regulation”.

Distribution of Gas

The Group distributed natural gas to approximately 0.576 million customers as of 31 December 2016. As of31 December 2016, the Group owned and operated 8,500 kilometres of gas distribution pipelines in Lithuania. Inthe year ended 31 December 2016, the Group distributed 7.39 TWh of natural gas to consumers, representing anincrease of 8.32 per cent. or 0.57 TWh compared to 2015. The Group does not distribute gas to consumers in anyother country.

The table below sets out the key operating indicators of ESO’s gas distribution business at the dates indicated:2016 2015 Change

––––––––––– ––––––––––– ––––––––––––––––––––––

(TWh) (TWh) +/- %Operating IndicatorsDistributed volume of natural gas.....................................................TWh 7.39 6.83 0.56 8.3Supply quality indicators of the networkGASSAIDI (with force majeure)...............................................................min. 0.529 1.034 -0.505 -48.84SAIFI (with force majeure) ..............................................................units 0.006 0.007 -0.001 -14.29

In 2016, ESO invested EUR 16.5 million in the construction and reconstruction of gas systems, a 24 per cent.increase compared to 2015. In 2016, ESO constructed 109.1 kilometres of gas distribution pipeline(2015: 82.7 kilometres) to connect new customers to the gas network and connected 5,375 customers to the gaspipelines, an increase of 32 per cent. compared to 2015 when 4,078 new customers were connected.

Gas Distribution Investment Plans

Lietuvos Dujos AB, the company whose operations were merged with LESTO AB and are now carried out by ESO,announced a ten-year investment plan in December 2015 which projected that its investments in the gas distributionnetwork would amount to EUR 141.1 million over a ten year period. ESO plans to allocate EUR 58 million of thisinvestment for the development of the distribution system in order to meet the demand generated by the growingnumber of natural gas customers. ESO plans to invest a further EUR 21 million to modernise remote data collectionand control systems, and EUR 20.4 million is planned to be allocated to reconstruct gas distribution pipelines. ESOhas also allocated EUR 11.7 million to modernise the gas metering system within ten years. ESO also intends toinvest in the reconstruction of gas pressure regulating equipment, the replacement and additional installation ofclosing devices, and investments in the reconstruction of corrosion protection equipment for the pipelines.

Regulation of Gas Distribution

The Group’s gas distribution business in Lithuania is regulated by the Lithuanian Law on Energy, the LithuanianLaw on Natural Gas and other regulatory legislation. A licence is necessary in order to distribute gas, which is issuedby the NCC for an indefinite period. Prices for gas distribution services are also regulated by the NCC, please see“Regulation — Legislation: the Republic of Lithuania — Regulatory Authorities”.

Electricity Generation

Overview

The Group owns and operates five generation facilities: the Elektrėnai Complex, which contains three gas and oil-fired power units with a combined installed capacity of 1,055.0 MW, two hydroelectric power plants with totalinstalled capacity of 1,000.8 MW and two wind farms with total installed capacity of 42.3 MW. For the year ended31 December 2016, 36 per cent. of all electricity generated in Lithuania was produced by LEG.

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The following table sets forth a breakdown of the total installed capacity of the Group’s power plants for the yearsended 31 December 2016 and 31 December 2015:

As of 31 December–––––––––––––––––––––––––––––––––––––––––––––––––––––

2016 2015––––––––––––––––––––––––– –––––––––––––––––––––––––

(MW) % (MW) %Gas and oil................................................................................................ 1,055.0 50 1,055.0 51Hydro........................................................................................................ 1,000.8 48 1,000.8 49Wind ......................................................................................................... 42.3 2 0.0 0Total installed capacity........................................................................... 2,098.1 100 2,055.8 100

As of 31 December 2016, the total installed capacity of the Group’s generation facilities was 2,098.1 MW,representing an increase of 42.3 MW, or 2 per cent., from 2,055.8 MW as of 31 December 2015. The increase wascaused by acquisitions of two wind parks. As of 31 December 2016, 50 per cent. of the Group’s total installedcapacity was gas and oil-fired and 50 per cent. was hydroelectric and wind power combined.

The following table sets forth a breakdown of the total electricity generated by the Group’s power plants by type ofenergy for the years ended 31 December 2016 and 31 December 2015:

For the year ended 31 December–––––––––––––––––––––––––––––––––––––––––––––––––––––

2016 2015––––––––––––––––––––––––– –––––––––––––––––––––––––

(TWh) % (TWh) %Gas and oil................................................................................................ 0.49 33 1.07 53Hydro........................................................................................................ 0.88 59 0.9 47Wind ......................................................................................................... 0.12 8 0.0 0Total electricity generated...................................................................... 1.49 100 2.01 100

In the year ended 31 December 2016, the Group generated 1.49 TWh of electricity, representing a decrease of 0.52TWh, or 26 per cent., from 2.01 TWh in the year ended 31 December 2015. The decrease was caused mainly by thelaunch of new electricity connections with Sweden and Poland in 2016 and the subsequent elimination of productionquotas for subsidised electricity production from the beginning of 2016. In the year ended 31 December 2016, 33 percent. of the Group’s total electricity generated was generated by gas and oil, and the remaining 67 per cent. wasgenerated by renewable sources including hydro power and wind.

Gas and Oil-fired Power Generation

The Group owns and operates the Elektrėnai Complex in Lithuania, which contains the Reserve Power Plants andthe CCGT, each of which is gas and oil-fuelled, with a combined installed capacity of 1,055 MW as of 31 December2016. The Reserve Power Plants have an installed capacity of 300 MW each and the CCGT has an installed capacityof 455 MW. The CCGT uses heat, which is a by-product of the generation of electricity by gas and heavy fuel oilpower plants to generate steam, which is then used to drive a steam turbine generator to make additional electricity.

In the year ended 31 December 2016, the Elektrėnai Complex generated 0.491 TWh of electricity, representing adecrease of 54 per cent. compared to the year ended 31 December 2015. The decrease was caused predominantlyby the launch of new electricity connections with Sweden and Poland in 2016 and the subsequent elimination ofquotas for electricity generation in the Elektrėnai Complex. The Elektrėnai Complex generated 33 per cent. of thetotal electricity generated by the Group in 2016.

In the year ended 31 December 2016, the Reserve Power Plants generated 0.024 TWh of electricity. On 28 December2016, the TSO announced that the provision of tertiary power reserve services in 2017 would be provided by theReserve Power Plants following completion of its first auction process. The Reserve Power Plants’ electricitygeneration and related balancing, regulation and tertiary power reserve provision services are regulated activities.

In the year ended 31 December 2016, the CCGT generated 0.468 TWh of electricity representing a decrease of55 per cent. compared to the year ended 31 December 2015. The decrease was caused predominantly by thecancellation of production quotas for subsidised electricity production from the beginning of 2016. The CCGT isalso responsible for providing Lithuania’s strategic power reserve, which is determined by the Government basedon proposals from the Lithuanian Ministry of Energy. In 2016, the CCGT was switched on 58 times representingan increase of 190 per cent. compared to the year ended 31 December 2015 when it was switched on 20 times. Theincrease was caused predominantly by disconnections of the NordBalt interconnection. The CCGT’s electricitygeneration and related balancing and strategic power reserve services are regulated activities.

The units in the Elektrėnai Complex have a diversified age profile. Construction of the CCGT was completed inOctober 2012 whereas the construction of the currently operational Reserve Power Plants’ electricity generation

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units were completed in 1971 to 1972. The units are affected by various factors including the availability of gas andoil. The Group has a schedule of regular repairs and overhauls for its gas and oil-fired power plants. Four powergeneration units in the Elektrėnai Complex were decommissioned in 2014 and 2015 and two units are inactive andare currently in the process of being decommissioned, in each case due to their poor technical condition, low potentialof use in the future, high maintenance costs and negative impact on the environment.

In the year ended 31 December 2016, the Group consumed 1.1 TWh of natural gas in relation to its power generationoperations which was primarily sourced from Group subsidiaries. The Group consumed approximately 2,000 tonsof oil in 2016, which was primarily sourced from reserves held by LEG.

The Group, through LEG, has permits for an indefinite term to engage in electricity generation activities at theReserve Power Plants and the CCGT. LEG also holds permits to expand electricity generation capacities at theReserve Power Plants. Since the establishment of LEG in 2011, all of the Group’s gas and oil-fired power plants inLithuania, which are owned by LEG, have complied with all environmental requirements and regulations. TheElektrėnai Complex was assigned approximately 0.24 million tons of CO2 emission allowances for the year ended31 December 2016. For additional information on CO2 emission allowances and the allocation of CO2 emissionallowances, please see “Regulation — Carbon Compliance (Emissions Allowances)”.

Hydroelectric Power Generation

The Group owns and operates 2 hydroelectric power plants in Lithuania, Kruonis PSHP and Kaunas HPP. In theyear ended 31 December 2016, its hydroelectric power plants had an installed capacity of 1,000.8 MW of electricity.In addition, the Group is also considering constructing a new unit in Kruonis PSHP.

Kruonis PSHP pumps water from the Kaunas reservoir using electricity at night (the “off peak period”) whenelectricity prices are relatively low and generates electricity during the day time (the “peak period”) when electricityprices are higher.

The following table sets forth certain information regarding the Group’s hydroelectric power plants as of31 December 2016:Plant Installed capacity (MW) Type of plant Start of operation–––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––– –––––––––––––––––––––––––– –––––––––––––––––––––––––––

Kruonis PSHP.......................................... 900 Pump Storage 1992-1998Kaunas HPP............................................. 100.8 Hydroelectric 1959Total installed capacity ............................ 1,000.8

In the year ended 31 December 2016, the Group’s hydroelectric power plants generated 0.88 TWh of electricity,representing approximately 47 per cent. of the Group’s total electricity generated, compared to 0.94 TWh or 59 percent. of the Group’s total electricity generated for the year ended 31 December 2015. The decrease in hydro electricityproduction was caused predominantly by lower generation in Kruonis PSHP due to unfavourable electricity pricespreads between peak and off peak prices during several months (mainly at the end of the year).

In the year ended 31 December 2016, Kruonis PSHP generated 0.517 TWh of electricity. Kruonis PSHP is alsoresponsible for secondary power reserve provision. Two units of Kruonis PSHP’s capacity (representing 450 MWof installed capacity) are allocated solely to providing secondary power reserves which can be switched on within15 minutes. This activity is regulated.

The remaining 2 units of Kruonis PSHP’s capacity are allocated to providing electricity on market terms. Thisactivity was regulated by the NCC in 2015 but ceased to be regulated from October 2016 following a ruling by theSupreme Administrative Court.

In the year ended 31 December 2016, Kaunas HPP generated 0.363 TWh of electricity. Kaunas HPP also generateselectricity which is used for the recovery of the electricity system when there has been a sudden loss of power inthe system, for example, when there is an electricity “black-out”. Electricity generation at Kaunas HPP and relatedbalancing and regulation services are commercial activities.

Hydroelectric power plants have a high degree of flexibility in the regulation of their output. The ability to controlhydroelectric power plants centrally permits the hydroelectric plants to commence operation rapidly therebyregulating electricity output. Neither conventional nor pump storage hydroelectric power plants release pollutingemissions into the atmosphere. These plants also represent an inexpensive source of electricity, particularly in periodsof peak demand. In addition, pump storage power plants allow the productive use of excess electricity generated bybase load plants by operating storage pumps in periods of low demand. Further development of hydroelectric powergeneration in Lithuania is limited by the topography of the region and Law on Water. As a result, other than theconstruction of a new unit in Kruonis PSHP, the Group does not currently expect to construct any new hydroelectricpower plants in Lithuania.

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Wind Power Generation

The Group owns and operates two wind farms in Lithuania and Estonia with total installed capacity of 42.3 MW,which were both purchased in the first quarter of 2016. In the year ended 31 December 2016, these wind farmsgenerated 0.123 TWh of electricity. The Group also plans to develop its own wind farm near Kruonis and plans toacquire wind power projects at a stage when the necessary infrastructure for the installation of a wind farm hasalready been developed, where land plots have been leased, connection to the power grid is present and territorialplanning and public health and environmental requirements have been met. The progress of these developmentsdepends significantly on the level of subsidies that will be provided by the Government.

Nuclear Power Generation

Lithuania has been working towards the development of a new nuclear power plant project, Visaginas NPP, whichis intended to operate in the joint Nordic/Baltic region. The project’s preparation works were being carried out bythe Group via UAB VAE SPB, a special purpose vehicle. However, this project is currently on hold following anegative vote in an advisory non-binding referendum on the development of a new nuclear power plant in Lithuaniain October 2012.

Trading and Supply of Electricity and Gas

Trading of Electricity

The Group’s electricity trading activities are conducted through Energijos Tiekimas, and consist of three separateactivities: (i) planning and optimisation of LEG’s generation capacity and sales of electricity generated by LEG;(ii) purchasing electricity for its consumer supply business; and (iii) hedging and proprietary wholesale trading.Energijos Tiekimas, is a member of the Nord Pool Exchange, Nasdaq Commodities Exchange and theIntercontinental Exchange (“ICE”). Energijos Tiekimas is the only Lithuanian power supplier active on the NasdaqCommodities exchange and on the ICE.

From 2016, all electricity generated by the Group’s Lithuanian power plants is sold directly on the Nord PoolExchange. Generated electricity is traded on day ahead as well as intraday markets. Since 2010, the wholesale priceshave been unregulated. Prices on the Nord Pool Exchange are set on the basis of supply and demand. When tradingon a day ahead basis, the Group submits sell bids for physical electricity to be delivered the next day, whereas intra-day market trading allows the Group to trade physical electricity to be delivered on the same day. Due to the natureand flexibility of the generation assets and optimisation activities, total generated volume may differ from the volumesold. In 2016 the Group’s power plants generated 1.19 TWh, compared to 2.04 TWh in 2015. Asset backed soldelectricity volume was 1.57 TWh in 2016, compared to 2.22 TWh in 2015.

The Group’s electricity supply and generation portfolios are separated in accordance with the Third Energy Package,REMIT and best market practices. Accordingly, Energijos Tiekimas sources electricity for its supply portfolio directlyfrom the Nord Pool Exchange or through bilateral agreements with third parties, rather than directly from LEG.Energijos Tiekimas estimates that a significant proportion of the electricity it purchased for its supply portfolio in2016 was imported from outside Lithuania as the marginal cost of electricity production in Lithuania was higherthan the cost of importing electricity. As of 31 December 2016, the Group had entered into a number of long-termcontracts for physical power supply with various durations (the longest duration being until 31 December 2019) atprices which reflect prices on the derivative or wholesale markets in order to minimise price risk.

In order to manage market price fluctuation risk, Energijos Tiekimas hedges retail portfolio exposure using physicaland financial instruments traded over-the-counter or on the Nasdaq Commodities Exchange. The Group began itsproprietary electricity wholesale trading activity in 2016, through Energijos Tiekimas. Energijos Tiekimas tradesboth standard and nonstandard physical and financial derivative products for the Group’s own account bilaterallyand on the Nasdaq Commodities Exchange and Nord Pool Exchange. In 2016 the Group’s wholesale trading volumewas 8.7 TWh.

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The following table sets forth a breakdown of the volume of electricity purchased and sold by the Group on wholesalemarkets (including the Group’s net electricity generated and total sales to consumers) for the years ended31 December 2016 and 31 December 2015:

For the year ended 31 December–––––––––––––––––––––––––––––––––––––––––––––––––––––

Change in 20162016 2015 compared to 2015

––––––––––– ––––––––––– ––––––––––––––––––––––––

(TWh) (TWh) %Wholesale trading in electricity, TWhElectricity purchased on wholesale markets ........................................ 15.07 6.15 145.04ESO portfolio ........................................................................................... 3.78 3.75 0.80Energijos Tiekimas (for Energijos Tiekimas retail customers) ................ 1.78 1.46 21.92Energijos Tiekimas (for Kruonis PSHP) .................................................. 0.81 0.94 (13.83)Energijos Tiekimas (for proprietary trading purposes) ............................ 8.70 0.00Electricity sold on wholesale markets................................................... 10.27 2.22 362.61LEG (through Energijos Tiekimas) .......................................................... 1.45 2.22 (34.68)Energijos Tiekimas (for proprietary trading purposes) ............................ 8.70 0.00Eurakras.................................................................................................... 0.07Tuuleenergia ............................................................................................. 0.05Balance of wholesale trading in electricity ........................................... 4.79 3.93 21.88Electricity generated and sold to consumers, TWhTotal electricity generated by the Group (gross) ................................. 1.56 2.04 (23.53)LEG .......................................................................................................... 1.44 2.04 (29.41)LEG – Elektrėnai Complex ...................................................................... 0.49 1.09 (55.05)LEG – Kaunas HPP.................................................................................. 0.37 0.28 32.14LEG – Kruonis PSHP............................................................................... 0.57 0.67 (14.93)Eurakras.................................................................................................... 0.07Tuuleenergia ............................................................................................. 0.05Own consumption of electricity generated........................................... 0.81 0.94 (13.83)Kruonis PSHP........................................................................................... 0.81 0.94 (13.83)Total electricity generated by the Group (net)..................................... 0.75 1.10 (31.82)Technological losses ................................................................................ 0.67 0.67 0.00ESO .......................................................................................................... 0.62 0.62 0.00LEG .......................................................................................................... 0.04 0.05 (20.00)Eurakras.................................................................................................... 0.00Tuuleenergia ............................................................................................. 0.00Electricity sold by the Group to consumers ......................................... 4.93 4.58 7.64Energijos Tiekimas ................................................................................... 1.78 1.46 21.92ESO .......................................................................................................... 3.15 3.12 0.96Balance between electricity generated by the Group and sold to its consumers............................................................................... (4.85) (4.16) (16.59)

The Group carries out proprietary trading that consists of taking on energy commodity (electricity and emissions)exposures in European markets by means of financial derivative instruments and contracts for physical deliveryexchanged on the regulated and over-the-counter markets, seeking to exploit arbitrage opportunities and speculatingon price developments. By trading on its own account, the Group aims to generate additional profits. The Groupcarries out these activities through Energijos Tiekimas which has a formal governance framework with strict risklimits set by its board of directors and in coordination with the Group’s Risk Management Committee. The Grouphas specific controls in place in terms of quantitative risk limits (value at risk and other risk limits, including a EUR3 million stop-loss). Credit risk management for trading operations is based on strict evaluation, assignment andmonitoring procedures that the Group believes are in accordance with international best practices.

Trading of Gas

The Group’s gas trading activities, conducted through LDT and LITGAS, encompass selling natural gas on wholesalemarkets through bilateral agreements and trading on GET Baltic, the local gas exchange. Natural gas is also tradedon “cross-border interconnection points” of transmission systems in the Baltic region and on “virtual trading points”without a defined physical location in the Lithuanian transmission system, both as defined in the Glossary. Smallscale LNG trading activities are also conducted in the Baltic region through the LNG Terminal in Klaipėda.

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Gas financial instruments, which are primarily used to hedge changes in physical gas supply portfolios, are used byLDT, which has ISDA agreements in place with well-known financial institutions and major European gas traders.

Supply of Electricity

Lithuania

In the year ended 31 December 2016, the Group, through its subsidiary Energijos Tiekimas, supplied electricity toapproximately 6,700 commercial customers, which is the largest electricity customer base in Lithuania. In the yearended 31 December 2016, the Group supplied 1.7 TWh of electricity to commercial customers in Lithuania,representing an increase of 16.8 per cent. compared to the year ended 31 December 2015. The increase was causedpredominantly by the acquisition of large corporate customers and an overall increase in the number of customersdue to competitive pricing, flexible, tailored products and excellent customer service. Energijos Tiekimas achieveda market share among independent electricity suppliers in sales to consumers in Lithuania in the year ended31 December 2016 of approximately 25.0 per cent. compared to 21.8 per cent. in 2015, according to the NationalCommission for Energy Control and Prices.

Latvia

In the year ended 31 December 2016, Energijos Tiekimas, through its subsidiary Geton Energy SIA, sold 136 GWhof electricity to consumers in Latvia, representing an increase of 54  per cent. compared to the year ended31 December 2015. The increase was caused predominantly by competitive pricing, flexible, tailored products andexcellent customer service. The Group’s subsidiary Geton Energy SIA is the fourth-largest supplier in the Latvianelectricity market according to the Group’s data.

Estonia

In the year ended 31 December 2016, Energijos Tiekimas, through its subsidiary Geton Energy OU, sold 0.052 GWhof electricity to consumers in Estonia, representing a decrease of 99  per cent. compared to the year ended31 December 2015. This decrease was caused predominantly by the loss of a significant customer which constitutedthe majority of Geton Energy OU’s revenue. The Group’s subsidiary Geton Energy OU is one of the smallestsuppliers in the Estonian electricity market according to the Group’s internal data. The Group is currently consideringits plans for this subsidiary given the loss of its main customer.

Supply of Gas

In the year ended 31 December 2016, the Group, through its subsidiaries LDT and LITGAS, supplied gas toapproximately 6,700 industrial and business companies and 560,000 household customers. LDT supplies naturalgas to industrial and business companies and household customers. LITGAS is the designated supplier of LNG inLithuania and is responsible for ensuring that a minimum quantity of gas is delivered through the Klaipeda LNGTerminal. The gas supplied by LITGAS as designated gas supplier through the Klaipeda LNG Terminal is purchasedfrom Statoil ASA under a long term LNG supply contract concluded on 9 September 2014, which expires at the endof 2024. The price of LNG does not have a material impact on LITGAS’s designated supply business given that thedesignated supply of gas is a regulated activity and its profit margins are set by the NCC. In 2016, LDT purchasedapproximately 44 per cent. of the gas it supplied to consumers from the LNG Terminal in Klaipeda. The remainderwas purchased from Gazprom through natural gas pipelines and other sources such as wholesale markets undershort term natural gas supply contracts. LDT’s decision to purchase gas from either the Klaipeda LNG Terminal orGazprom is based on price and the need to ensure diversification of supply. In 2014, LDT received a retrospectivediscount on the price of the gas it had purchased from Gazprom since 1 January 2013. The majority of the discountreceived from Gazprom was distributed to end-users between 2015 and 2016. The remaining portion of the discountwill be distributed to consumers in the first half of 2017. However, LDT does not expect that the expiry of thediscount distributed to consumers will significantly affect its business as it expects that it will be able to continuesourcing natural gas at competitive prices under short term contracts from Gazprom and through the Klaipeda LNGTerminal.

In the year ended 31 December 2016, the Group supplied 11.30 TWh of gas to 569,700 consumers, representing adecrease of 19 per cent. compared to the year ended 31 December 2015. The decrease was caused predominantlyby the cancellation of production quotas for subsidised electricity production, which in turn decreased the productionof electricity using gas in the CCGT which led to lower gas sales from LITGAS to LEG and decreases in wholesalesales volumes completed in year 2015. LDT and LITGAS achieved a market share in sales to consumers in Lithuaniain the year ended 31 December 2016 of approximately 46 per cent. (90 per cent. for households segment) comparedto 50 per cent. (99 per cent. for households segment ) in 2015, according to the Group’s data. In the year ended

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31 December 2016, the Group’s revenues from the supply of gas were EUR 267.6 million, representing a decreaseof EUR 31.5 million, or 10.5 per cent., from EUR 299.2 million in the year ended 31 December 2015. The revenuedecrease was caused by a combination of a decrease in sales volume, natural gas prices and the cancellation ofproduction quotas for subsidised electricity production, which in turn decreased the production of electricity usinggas in CCGT which led to lower gas sales from LITGAS to LEG.

The supply of gas to consumers in Lithuania is regulated by the Lithuanian Law on Energy, Law on LiquefiedNatural Gas Terminal, the Lithuanian Law on Natural Gas and other regulatory legislation. A licence is necessaryin order to supply gas, which is issued by the NCC for an indefinite period. A licence for LITGAS was issued on27 December 2013, and for LDT on 13 October 2014.

At the end of June 2017, LDT signed a contract with the U.S. energy company Cheniere Marketing Internationaland purchased a LNG cargo. It is expected that the LNG will be supplied directly from the U.S, which would be thefirst time that LNG from the U.S. has been imported directly to Lithuania. LDT intends to store a part of the LNGpurchased at a lower price during the summer in the Incukalns LNG storage facility in Latvia.

Other Businesses

Heat Generation

The Elektrėnai Complex also contains steam and biofuel boilers which generate heat and have an installed capacityof 90 MW. The Reserve Power Plants sold around 130 GWh of heat in 2016.

Part of heat generation is a regulated activity. Regulated heat generation comprises generation which is sold to alocal heat supplier. A small part of heat generation is not regulated by the NCC. Non-regulated heat generationcomprises generation sold directly to companies. However, both activities are treated as regulated activities in thecompany’s managerial accounting. LEG has permits for indefinite term to engage in heat generation activities atthe steam and biofuel boilers in the Elektrėnai Complex.

Biomass in the form of wood chip, straw and pellets is combusted in the Elektrėnai Complex. In the year ended31 December 2016, the Group burned 12,000 tons of biomass in the Elektrėnai Complex.

Construction of the steam and biofuel boilers in the Elektrėnai Complex were completed in 2015. The units areaffected by various factors including major equipment failure, operational accidents, disruptions in the supply ofbiofuel and district heating water contamination. The Group has a schedule of regular repairs and overhauls for itssteam and biofuel boilers. Since 2015, all of the Group’s steam and biofuel boilers have complied with allenvironmental requirements.

Provision of Ancillary Services

Contracting activities

The Group’s contracting activities are conducted through EnePRO. EnePRO’s activities include the reconstruction,repair and technical maintenance of electricity equipment and power stations, installation of boilers, technologicalpipes and other installation works, manufacturing of stacks, metal construction structures, pressure vessels andmanagement of engineering projects. EnePRO provides services to Lithuanian energy sector companies andcompanies of other sectors and natural persons in Lithuania. In the year ended 31 December 2016, EnePRO’srevenues were EUR 30.6 million (EUR 60 million in 2015) and its net loss was EUR 7.2 million (EUR -1.2 millionin 2015). The decline in revenue and the net loss was predominantly caused by lower scopes of works and loss-making orders (including those concluded in the previous periods).

Real estate management and transport services

The Group’s real estate management and transport services activities are conducted through NTV. NTV is one ofthe largest property management and transport services companies in Lithuania according to internal data. It isengaged in the long-term and short-term lease of administrative, production and warehousing premises as well aslong-term and short-term lease of territories and long-term and short-term lease of cars and special purpose motorvehicles and equipment, management of vehicle fleet, accommodation and conference organisation services. In theyear ended 31 December 2016, its revenues were EUR 21.7 million (EUR 17.4 million in 2015) and EBITDA beforeelimination of intragroup transactions was EUR 8.3 million (EUR 5.7 million in 2015).

Data centers and data transmission services

The Group’s data activities are conducted through DLC. DLC is one of the largest operators of data transmissionnetworks and data centres in the Baltic region. DLC provides data transmission services to companies and

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communication operators, manages data centres in which major banks, telecommunication operators, cloudcomputing services providers and other companies store their equipment. In the year ended 31 December 2016, itsrevenues were EUR 4.4 million (EUR 4.9 million in 2015) and EBITDA before elimination of intragroup transactionswas EUR 1.0 million (EUR 1.0 million in 2015).

Customer service activities

The Group also transferred its electricity and gas customer service activities to a joint service centre known as Gile,which is managed by its subsidiary, VAC. Gile services customers of ESO and LDT.

Shared services

VAC provides organisation and performance of public procurements, accounting and employment relationshipadministration services to the Group’s subsidiaries.

Group subsidiary Technologijų ir Inovacijų Centras UAB is one of the largest ITT companies in Lithuania, accordingto internal data, providing IT and telecommunication services to Group companies.

Training

The Group’s training activities are conducted through EMC. EMC provides training for workers, engineers, managersand executives working on electricity and heat sector management, occupational safety and health, welding andhoisting equipment, work organisation and training on topics related to the gas sector. It also provides regular trainingto and certifies foremen responsible for the maintenance of potentially dangerous equipment and heads of specialworks.

Divestment of non-core activities

The Group is planning to divest its non-core activities which are conducted through NTV, DLC and EMC, if marketconditions are favourable.

Other Ancillary Businesses

From 2016 the Group through its new created subsidiary UAB, Elektroninių Mokėjimų Agentūra” started providingfinancial services, collection of payments for utility services and other periodic payments from customers and theirdistribution to service providers.

In February 2016, the Issuer, established a new company Energijos Sprendimų Centras UAB which will bedeveloping projects on energy efficiency improvement and renewable energy resources in Lithuania and abroad.The operations of the new company will be based on the ESCO (“Energy Service Company”) model which definesthe company providing energy efficiency improvement services as the entity investing in energy efficiency measuresand covering the investments made using future energy savings during the validity term of the agreement. Theoperations are intended to enable the Group to achieve the highest impact of energy efficiency whilst at the sametime avoiding large initial investments by the owners of buildings or equipment.

Property, Plant and Equipment and Investment Property

The Group owns all of its significant generation facilities and other properties and the Group holds the title to all ofthe land underlying its operation facilities. The Group’s plant, property and equipment mainly comprise powerplants and electricity and gas distribution networks as the well as administrative buildings, investment property andother assets. As of 31 December 2016, the Group owned buildings with a total net book value of EUR 103,038,000,other property, plant and equipment and investment property items with a net book value of EUR 1,711,607,000and land with a net book value of EUR 2,376,000.

A restitution process is underway in Lithuania, involving the return of nationalised real property to its previousowners, following the change of the regime and the fundamental change in principles of registration of real estateproperty in the Lithuania in 1990. A significant part of the Group’s distribution assets, including its electricity andgas distribution networks, is located on real property which was previously owned by the Republic and has nowbeen returned to its previous owners as a result of the restitution process, please see “Risk Factors–Risks Relatingto the Regulatory and Legal Environment–Risks associated with restitution claims in Lithuania”.

As of 31 December 2016, the Group owned net plant in service pledged as a security for liabilities in the amount ofEUR 353,686,000, representing 39.7 per cent. of total net book value of plant in service as of 31 December 2016.

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The Group plans to sell and leaseback all of the administrative buildings that it owns by 2019 in order to use itsbalance sheet more effectively and focus on its core activities.

Capital Expenditures

In the year ended 31 December 2016, the Group’s investments amounted to EUR 238.1 million, representing anincrease of 58.3 per cent. compared to the year ended 31 December 2015. Without taking into consideration theacquisition of the wind farms, investments increased by 16.4 per cent. or EUR 24.7 million compared to 2015(EUR 150.4 million). Investments in the maintenance and development of the electricity distribution network madeup 52.2 per cent. of the total investments for 2016. The Group expects its investments in 2017 will amount toapproximately EUR 253 million, of which EUR 176 million will be made by ESO (primarily investments in theelectricity distribution network) and EUR 46 million will be made by the Group in the Vilnius CHP plant.

In the year ended 31 December 2016, investments allocated by ESO for the maintenance of the electricity distributionnetwork increased by EUR 14.1 million to EUR 84.7 million, representing an increase of 20 per cent. compared tothe year ended 31 December 2015 and investments allocated by ESO for the development of the electricitydistribution network decreased by EUR 3.4 million to EUR 39.5 million, representing a decrease of 8 per cent.compared to the year ended 31 December 2015. The Group is in the process of reviewing its plans to modernise itselectricity distribution network and expects to complete this review in the third quarter of 2017. It does not anticipatethe total amount of its capital expenditure in respect of these plans to change significantly, please see “—The Group’sStrategy”.

In the year ended 31 December 2016, investments in real estate increased by EUR 6.1 million to EUR 7.3 millionfrom the year ended 31 December 2015. The increase was caused predominantly by the lease right to the land plotacquired by the Group subsidiary Kauno Kogeneracinė Jėgainė UAB as an in-kind contribution. The value of thelease right is equal to EUR 4 million. Investments also increased because of reconstruction works carried out atbuildings held by the Group.

In the year ended 31 December 2016, investments in IT, telecommunication and management systems increased byEUR 5.6 million from the year ended 31 December 2015. The increase was caused predominantly by the Groupcompany Technologijų ir Inovacijų Centras UAB’s EUR 2 million investment in the data transmission network andother less significant investments made by Group subsidiaries. Investments in transport increased by EUR 5.2 millionfrom the year ended 31 December 2015. The increase was caused predominantly by a regular renovation of theGroup’s fleet of motor vehicles and the acquisition of fire fighting vehicles by the Group company NTV that wereleased to the state fire fighting and rescue services. In 2016, no investments were made in the heat generationcapacities.

In the year ended 31 December 2016, the Group’s assets increased by 4  per cent. or EUR 93 million toEUR 2,432.2 million compared to the year ended 31 December 2015 (EUR 2,339.2 million). The increase wascaused predominantly by the acquisition of the wind farms in Lithuania and Estonia and accordingly property, plant,and equipment increased by EUR 63 million and the total amount of non-current assets increased byEUR 105.8 million or 5.4 per cent.

The Group makes independent investment decisions according to the investment plans and respective decisions ofindividual Group subsidiaries. However, the Group determines general principles regarding investments in specificprojects or the creation of new services encompassing financial assessment criteria and risks of investments thatare required to be assessed when determining the financial recoverability of the investment project. However, certainactivities planned by the Group, including mergers and acquisitions, establishment of new legal entities by the Issuer(but not Group subsidiaries) and reorganisations or equity injections into the Group’s principal subsidiaries requirethe approval of the Government. Additionally, ESO requires the approval of regulators for: (i) investments inregulated activities over EUR 1.5 million (in respect of its electricity distribution activities) and (ii) any investmentwhich accounts for more than 5 per cent. of its total annual capital expenditure (in respect of its gas distributionactivities) and LEG requires the approval of regulators for any investment related to its regulated activities. As ofthe date of this Base Prospectus, neither the Government nor any regulator has materially altered any investmentplan submitted by the Group. The Group also makes investments on behalf of the Government in economic projectsof State significance.

Employees

The Group had 4,859 and 5,379 employees in the years ended 31 December 2016 and 2015, respectively. Thedecrease was caused predominantly by various factors arising from the Group’s corporate reorganisation.

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ESO had 2,677 and 3,149 employees in the years ended 31 December 2016 and 2015, respectively. The decreaseswere caused predominantly by the Group’s corporate reorganisation, including the transfer of 240 ESO’s customerservice and legal services employees to VAC. LEG had 399 and 414 employees in the years ended 31 December2016 and 2015, respectively. The decrease was caused by the transfer of LEG’s legal services employees to theIssuer and VAC, as part of the Group’s corporate reorganisation.

The Group has developed employment policies to meet the needs of its different business segments, embodyingprinciples of equal opportunity. The Group encourages involvement of employees in the performance of the businessin which they are employed and aims to achieve a sense of shared commitment through programmes such as theIssuer’s long-term managerial staff training programmes which have the goal of developing a uniform leadershipculture to achieve the strategic business objectives of the Group.

As of 31 December 2016, all employees of the Issuer were covered by three collective bargaining agreements inaccordance with Lithuanian law. The new Labour Code in Lithuania, which is expected to come into force on 1 July2017, is expected to ensure greater flexibility of labour relations in terms of working schedules and overtimeregulations as well as employment conclusion and termination. The Group will review its labour regulations and,in accordance with the new Labour Code, renew collective bargaining agreements. As at the date of this BaseProspectus, the Group has not experienced any strikes or work stoppages in Lithuania.

Research and Development

For the purpose of implementing the Group’s operational strategy for 2014–2020, and with a view to promotinginnovations, Lietuvos energija UAB is in the process of establishing an Innovations Fund (the Fund). The Fundwill provide funding for start-ups in the energy sector. The Fund will seek to cooperate with start-ups and researchinstitutions, targeting the development of new services and sustainable products as well as contributing to thecommercialisation of research and development (R&D) in the energy sector. The capital commitment of the Fundwill be approximately EUR 7 million (including all fees, expenses and accelerations costs) for an investment periodof 5 years. The Fund is seeking a financial partner which would manage the implementation of the accelerationprogramme and the fund itself.

The Group’s other R&D projects are mainly performed by private scientific institutions, or by the academic sector.R&D covers numerous topics in micro generation, smart metering, electricity quality, waste-to-energy, chimneytechnology. The Issuer has entered into a cooperation agreement with the biggest technical university in Lithuania,with whom the Issuer has established an applied research centre, which helps it to develop its scientific base andknowledge in a fast and efficient way. The Issuer also encourages students by offering scholarships and internshippositions.

The Issuer is also a the member of the EURELECTRIC Innovation working group, the Issuer is involved ininternational energy R&D projects, particularly in the E.U.’s Framework Programs, mainly in areas of waste-to-energy, big data, smart grids, energy storage solutions. The Issuer is also involved in long term R&D programmesdevelopment group for Lithuanian scientific institutes.

Licences

As of the date of this Base Prospectus, the Group holds all material licences necessary for the operation of itsbusiness. For information on licences and permissions required under the Energy Law and under other applicableregulations, please see “Regulation—Electricity Sector—Licensing Regime”, “Regulation—Heating Energy Sector—Licensing Requirements” and “Regulation—Gas Sector—Licensing Regime”.

Insurance

The Group maintains several types of insurance to protect it against potential liabilities.

LEG maintains insurance for its power plants, excluding its hydro power plants. The Group plans to obtain insurancepolicies to cover its hydro power plants in 2017, please see “Risk Factors—The Group’s insurance coverage maynot be adequate”. Additionally it maintains surety insurance for major waste projects.

ESO maintains insurance policies covering assets such as dispatch management systems, electrical installations andbuildings financed from E.U. funds. ESO’s technological assets, including its distribution assets, are not coveredby insurance as such costs are not covered under regulated tariffs for distribution activities, whereas repair costs fortechnological assets are covered under such tariffs.

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The Group also maintains insurance policies covering non-technological equipment, general third party liabilityinsurance in connection with its main operations and car insurance. The Group also has insurance policies coveringdirectors’ and officers’ liability.

Risk Management

The Group continues to develop its integrated risk management system in order to increase its fundamental valuewhile taking into account the level of risk acceptable for its Shareholder. The ultimate risk authority is the RiskManagement Supervision Committee of the Supervisory Council, please see “Management—Committees of theSupervisory Council—Risk Management Supervision Committee”. The Risk Management Supervision Committeeis responsible for reporting to the Supervisory Council on the risks that the Group faces and implementation of riskmanagement or prevention measures.

The Risk Management Supervision Committee comprises:

(a) the Chair, who also sits on the Supervisory Council;

(b) one member representing the Government; and

(c) two independent members.

The Risk Management Supervision Committee continuously monitors the overall impact of risk on the Group andactions the Group takes to minimise those risks, such monitoring includes the implementation of internal controlprocedures and risk management measures, the assessment of the regular risk identification and assessment cycle,the establishment and control of risk registers and the drafting of risk management related internal documents.

The Risk Management Supervision Committee meets to assess risk factors on at least a quarterly basis. During theseperiodical risk self-assessment meetings, the Committee identifies the systemic risks to the Group. Systemic risksare those risks which are relevant to at least two of the Group’s subsidiaries and where the level of the risk is higherthan the defined Group risk appetite. Risk appetite (accepted risk level expressed as a percentage of EBITDA) isapproved by the Board of the Issuer. Measures and initiatives to mitigate these risks are the responsibility of themanagement of the Issuer and the relevant subsidiaries. The Committee also identifies risks which are specific toindividual subsidiaries of the Group. The Committee advises the relevant subsidiary of any risks relevant to it andmakes recommendations to mitigate such risks. These risks are the responsibility of the relevant subsidiary. TheCommittee also assesses the implementation of its recommendations on a bi-annual basis.

The main systemic risks which have been identified for 2017 are:

(a) Health and safety of employees, residents and contractors;

(b) Information security (cyber security);

(c) Market changes and competitiveness;

(d) Management of strategic and internal change projects; and

(e) Regulation and compliance.

There are also specific risks which are material to specific subsidiaries and the Group as a whole.

For 2017, the Risk Management Supervision Committee identified the main issues in this category to be:

(a) Inadequate project management by EnePRO;

(b) Changes in regulatory regime associated with selection of regulated services providers;

(c) The health and safety of ESO’s employees, subcontractors and consumers;

In order to control risk management effectiveness there is Group level risk tolerance for main financial results andkey risks. Risk limits are set for specific risks. Risk tolerance and limits are approved by Board of the Issuer.

Property, casualty and other operational risks are managed through using insurance, emergency and crisis planningand preventive actions.

For more information relating to material risks that the Group faces, please see “Risk Factors” and Note 3 of the2016 Financial Statements.

In addition to the Risk Management Supervisory Committee, there is the Audit Committee of the Company’sSupervisory Council. The Audit Committee of the Company’s Supervisory Council (“Audit Committee”) isresponsible for the submission of the objective and impartial conclusions or proposals to the Supervisory Councilon the functioning of the audit and control system in the Group. The Audit Committee is responsible for monitoring

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the process of preparation of financial statements of the Issuer and the Group’s subsidiaries, with a focus on therelevance and consistency of accounting methods used. In addition it is responsible for monitoring the effectivenessof internal controls and risk management systems of the Issuer and the Group’s subsidiaries, to analyse the need forand relevance of these systems and perform the review of the existing internal control management systems.

Environmental Matters

The Group’s activities are regulated by the following environmental legislation; the Law of EnvironmentalProtection, Law on Energy, Law on Electricity and the Law on Natural Gas, please see “Regulation—Security ofElectricity Supply” and “Regulation—Legislation: the Republic of Lithuania—Overview”. When planning itsactivities the Group assesses the environmental requirements set out in the legislation and takes into account trendsin environmental protection. As of the date of this Base Prospectus the Group is in compliance with all materialenvironmental legislative requirements.

Legal Proceedings

The Group is currently involved in a number of legal proceedings; however, the Group believes that liabilitiesrelating to such proceedings would not, individually or in the aggregate, have a material adverse effect on its resultsof operations or financial condition. Certain significant legal proceedings in which the Group has been involved inthe 12 months preceding the date of this Base Prospectus are described below.

ESO and LDT

On 29 January 2015, UAB Vilniaus Energija (“VE UAB”) brought a claim before the Vilnius Regional Court againstLDT and ESO for breach of pricing rules set out in natural gas supply agreements between the parties. VE UABclaims that LDT and ESO breached the agreements because they did not transfer a retrospective discount receivedfrom the natural gas supplier (Gazprom) directly to the claimants, who acted as purchasers under the agreements,and claims EUR 15,234,614.94 as compensation for the alleged overpayment for natural gas supplies.

On 21 January 2016, the Vilnius Regional Court dismissed the claim.

On 19 February 2016, VE UAB lodged an appeal which was rejected by the Court of Appeal of Lithuania on17 November 2016; the Court upheld the decision of the Vilnius Regional Court of 21 January 2016.

VE UAB lodged a further appeal which was accepted by the ruling of the Supreme Court of Lithuania dated23 February 2017. The court hearing in the Supreme Court of Lithuania took place on 21 June 2017. The Court’sdecision will be announced on or around 5 July 2017.

On 3 April 2015, AB “Amilina” brought a claim before the Vilnius Regional Court against ESO and LDT on similargrounds and claimed EUR 1,038,849.79 as compensation for the alleged overpayment for natural gas supplies.

On 7 October 2016, the Vilnius Regional Court dismissed the claim by the decision.

On 8 November 2016, AB “Amilina” lodged an appeal at the Court of Appeal of Lithuania; the procedural decisionof the Court of Appeal of Lithuania will be announced on or around 27 June 2017.

The Group believes that it will defend these proceedings successfully and has not made provisions for theseproceedings in its historical consolidated financial statements.

ESO

On 27 March 2014, VE UAB brought a claim against ESO before the Vilnius Regional Court claiming damages ofEUR 10,711,700.00. VE UAB and ESO entered into an electricity sale and purchase agreement under which VEUAB supplied ESO with electricity for ESO’s public supply activities (“Supported Production Volume”). TheSupported Production Volume is determined under the Resolution of the Government of the Republic of LithuaniaNo 1051 “Regarding the Determination of the Providers of the Services of Public Interest and of the Scope ofProvision of the Services of Public Interest for 2014” of 20 November 2013. VE UAB claims the SupportedProduction Volume in the agreement with ESO is below the Supported Production Volume stipulated in theresolution. ESO believes the resolution provides it, as public supplier of electricity in Lithuania, with flexibility todetermine the exact Supported Production Volume.

The oral hearing in the Vilnius Regional Court will take place on 28 August 2017.

The Group believes that it will defend these proceedings successfully and has not made provisions for theseproceedings.

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LITGAS

AB “Achema” filed complaints against the European Commission (i) on 17 November 2016 concerning theResolution of the Commission dated No O3-369 “On Estimation of an Additional Component of Safety of NaturalGas Provision Set to the Price of Natural Gas Transfer” dated 8 December 2016, (ii) on 22 January 2016 concerningthe Resolution of the Commission No. O3-683 “On Estimation of an Additional Component of Safety of NaturalGas Provision Set to the Price of Natural Gas Transfer” dated 23 December 2015 and (iii) on 18 April 2016concerning the Resolution of the Commission No. O3-83 “On Estimation of an Additional Component of Safety ofNatural Gas Provision Set to the Price of Natural Gas Transfer” dated 25 March 2016 and (iv) on 16 June 2017concerning the Resolution of the Commission No. O3E-145 “On Recalculation of an Additional Component ofSafety of Natural Gas Provision Set to the Price of Natural Gas Transfer for year 2017” dated 15 May 2017. Theresolutions require all users of the Klaipeda LNG Terminal, including AB “Achema” to pay a proportion of theadditional component of the gas tariff which relates to the lease and maintenance of the Klaipeda LNG Terminal.AB “Achema” claims the resolutions to be unlawful on the basis that the Commission exceeded its competence inmaking the resolutions and that the resolutions contradict the legal acts of the Republic of Lithuania and the E.U..If such complaints are upheld by the court, AB “Achema” and other market participants may bring claims againstLITGAS, AB Klaipėdos Nafta and AB Amber Grid and/or the State claiming compensation for amounts alreadypaid.

The cases have been suspended and the court hearings will be scheduled only after the final decision in administrativecase No A-162-858/2017 have been heard. The decision in the latter administration case will be made after theGeneral Court of the E.U. has made its determination in the case concerning AB “Achema”s challenge of the decisionof the European Commission No SA.36740 (2013/NN) dated 20 November 2013, approving the payments receivedby LITGAS prior to 2016 for gas it supplied to electricity and heat producers performing regulated activities.LITGAS UAB has not been involved in this proceeding.

The future claims, if submitted, might be material to LITGAS’ business. However, the value of possible claims ishard to predict as certain details are not known (e.g. the number of defendants, the ground of claims, the divisionof responsibility between the defendants etc.).

Tuuleenergia OÜ (“TOU”)

On 13 December 2013, the owner of a property in close proximity to two wind turbines installed by TOU in Tallinn,Estonia filed a complaint against TOU in the Tallinn Administrative Court. He requested that construction permitsgranted by the Varbla Municipality allowing TOU to construct the two wind turbines and their operation bewithdrawn on the basis that the wind turbines had been constructed too close to nearby residential property and inbreach of regulatory requirements. The claim was dismissed by the Tallinn Administrative Court on 16 February2015. An appeal against this decision was dismissed by the Tallinn Regional Court of Second Instance on2 November 2015.

A further appeal against this decision was upheld by the Supreme Court of Estonia on 11 October 2016, whichwithdrew the permits for the operation of the two wind turbines on the basis that the operation of the wind farms wasunlawful. However, the Supreme Court of Estonia found that all the arguments related to the positioning of the turbineswere not founded and ruled that new proceedings must take place in order to issue lawful permits. Accordingly,TOU considers that, based on the judgement, the turbines can be positioned where they stand at the moment.

The claim itself does not impose any financial penalty or obligation upon TOU and TOU is indemnified for anylosses it may incur if it is held by a court that it required to dismantle the turbines.

The Group believes it will obtain a new permit to operate the turbines and does not believe TOU will be requiredto dismantle the turbines and on that basis has not made provisions for this proceeding in its historical consolidatedfinancial statements.

UAB Vilniaus kogeneracinė jėgainė (“VKJ”)

On 24 May 2017, Danpower Baltic UAB lodged an action before the EU General Court appealing the EuropeanCommission decision of 19 September 2016 relating to the case “State Aid SA.41539 (2016/N) – LithuaniaInvestment aid for high–efficiency cogeneration power plant in Vilnius, UAB Vilniaus kogeneracinė jėgainė(“VKJ”)” that approved EUR 153 million State Aid for VKJ (case T-295/17 Danpower Baltic v Commission). Thecontent of this action is not known by VKJ or the Issuer and as of the date of this Base Prospectus it is not knownwhat impact, if any, such action will have on the business, results of operations and financial condition of VKJand/or the Issuer.

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Anti-corruption Investigation

In December 2014, an action was brought by the UK Serious Fraud Office against Alstom Power Ltd, NicholasPaul Reynolds and Johanes Villi Venskus (Alstom employees) in connection with bribes alleged to have been madeby Alstom Power Ltd, Nicholas Paul Reynolds and Johanes Villi Venskus between February 2002 and March 2010to officials previously employed by a Group subsidiary, AB Lietuvos Elektrine, during a period of eight years inorder to secure AB Lietuvos Elektrine’s contract to supply burners to a power plant in the Elektrėnai Complex. In2013, LEG received a request for information regarding projects related to Alstom. However, neither LEG nor theGroup is currently the subject of this action or any investigation in connection with these charges and no chargeshave been brought against LEG, the Group, its subsidiaries or any of its current or former employees. The trial isexpected to start at Southwark Crown Court in October 2017.

In March 2017, the Lithuanian Special Investigation Services conducted searches at the homes of two former employeesof the Group: Rymantas Juozaitis, CEO of AB ”Lietuvos energija” between 2002 and May 2008 and CEO of LEOLT between May 2008 and October 2008, and Pranas Noreika, CEO of Lietuvos Elektrinė (Lithuanian Power Plant)between 1962 and 2010. According to media reports, the investigation is related to Alstom projects implemented inLithuanian Power Plant and Kaunas HPP. LEG provided information to the Lithuanian Special Investigation Serviceswhich it believes to have been requested in connection with these searches (although the Lithuanian SpecialInvestigation Services never confirmed the rationale for such information requests).

No searches were conducted in the premises of the Issuer or the Group’s subsidiaries and, to the Group’s knowledge,no homes of current employees were searched. The investigation is ongoing. To the knowledge of the Group nomember of the Group or current employee is the subject of this investigation and no charges have been broughtagainst the Group, its subsidiaries or current employees.

The Group does not anticipate that such investigations will have a material impact on the Group.

Recent Developments

On 15 May 2017, the Group published its Interim Financial Statements. See “Overview of Financial Information”and F-4 to F-16 included in this Base Prospectus.

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DESCRIPTION OF OTHER INDEBTEDNESS

The following summary of certain provisions of the Group’s material other indebtedness does not purport to becomplete and is subject to, and qualified in its entirety by reference to, the financial statements. Please also seeNote 19 of the 2016 Financial Statements and Note 19 of the 2015 Financial Statements, which are set out in thisBase Prospectus on pages F-68 and F-136 respectively.

The Group’s Indebtedness

The Group’s indebtedness mainly consists of borrowings from financial institutions. The Group maintains a flexiblefunding strategy and monitors domestic and foreign financial market conditions as part of its financing activities.

The Issuer and its subsidiaries have signed a variety of loan facilities. These facilities have been used for generalcorporate purposes, but have also been used as funding for particular projects such as financing for the acquisitionof wind power plants in Lithuania and Estonia. As of 31 December 2016 and 31 December 2015, borrowings fromfinancial institutions amounted to EUR 494 million and EUR 420 million, respectively.

Short-Term Indebtedness

The Issuer and its subsidiaries short-term debt position is as set forth in the table below:As of 31 December

––––––––––––– –––––––––––––

2016 2015––––––––––––– –––––––––––––

(EUR in thousands)

Current borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,948 1,490Letters of credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 206Bank overdrafts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 41,531Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5

––––––––––––– –––––––––––––

Total current borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,953 43,232––––––––––––– –––––––––––––––––––––––––– –––––––––––––

Total short-term debt (without current portion of long-term debt) as of 31 December 2016 was EUR 38,953 thousand,representing 7.9 per cent. of the Group’s total borrowings from financial institutions as of 31 December 2016.

Long-Term Indebtedness

The Issuer and its subsidiaries’ long-term debt position is set forth in the table below:As of 31 December

––––––––––––– –––––––––––––

2016 2015––––––––––––– –––––––––––––

(EUR in thousands)

Long-term bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 454,965 376,828of which current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,008 99,023

Total long-term debt as of 31 December 2016 was EUR 454,965 thousand, representing 92.1 per cent. of the totalamount of the Group’s total borrowings from financial institutions as of 31 December 2016. Long-term borrowingsfrom financial institutions comprised all of the long-term debt as of 31 December 2016.

Neither the Issuer nor any of its subsidiaries has issued domestic, or international bonds prior to the establishmentof this Programme.

As of 31 December 2016, all the Group’s long-term debt has floating rates of interest which can expose the Groupto interest rate risk. The floating rates are based mainly on EURIBOR or EONIA. For information regarding therepayment schedule of the Issuer and its subsidiary’s long-term debt and interest rates for short and long-term debt,please see Note 6 from the Interim Financial Statements, Note 19 from the 2016 Financial Statements and Note 19from the 2015 Financial Statements.

The Group has entered into interest rate swaps and other derivative contracts to manage risk associated withfluctuations in interest rates. For information with respect to derivative financial instruments and hedging, pleasesee Notes 3 and 26 from the 2016 Financial Statements and Notes 3 and 26 from the 2015 Financial Statements.

Indebtedness at subsidiary level

As at 31 December 2016, the current and non-current borrowings of the Issuer’s subsidiaries amounted toEUR 429 million, or 17.7 per cent. of the Group’s total assets. This accounts for 86.8 per cent. of the Group’s totalborrowings, which amounted to EUR 494 million, see “Risk Factors—Certain of the Group’s loans have been

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advanced to subsidiaries of the Issuer, which means that the Noteholders may be effectively subordinated to othercreditors of the Group”. In June 2017, the Board of Directors of the Issuer agreed in principle to transfer ESO’scurrent and non-current borrowings to the Issuer during 2017, subject to relevant lender approvals. The Group plansto transfer LEG’s current and non-current borrowings to the Issuer in the short to medium term, although noagreement has been reached on this.

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MANAGEMENT

General Overview

The Issuer has a two-tier board system consisting of a Board of Directors and a Supervisory Council. Its Board ofDirectors represents it in all matters and is responsible for its management, while its Supervisory Council is thebody that oversees its Board of Directors. The Board of Directors manages the Issuer’s day-to-day operations.

The Supervisory Council is a collegial supervisory body provided for in the Issuer’s Articles of Association. TheSupervisory Council functions at the Group level. Where appropriate, it addresses the issues related not only to theactivities of the Issuer, but also to the activities of its subsidiaries or the activities of their respective managementand supervisory bodies. For the purposes of effective fulfilment of its functions and obligations, the SupervisoryCouncil forms three committees: the Risk Management Supervision Committee, the Audit Committee, and theAppointment and Remuneration Committee.

The Board of Directors consists of the employees of the Issuer and is a collegial management body provided for inthe Issuer’s Articles of Association. The Board of Directors manages its operations and acts on its behalf. The powersand responsibilities of the Board of Directors are set forth in detail in the Issuer’s Articles of Association. Forinformation on the availability of the Issuer’s Articles of Association, please see “General Information—DocumentsAvailable”.

Supervisory Council

As of the date of this Base Prospectus and in accordance with the Issuer’s Articles of Association, the SupervisoryCouncil comprises six members, with one member nominated by each of the Ministry of Finance, the Ministry ofEconomy and the Office of the Government of the Republic of Lithuania, and three members being independentmembers. Additionally, the Chairman of the Supervisory Council is independent and, in the case of equality ofvotes, has the deciding vote. Accordingly, the Republic cannot make unilateral decisions on the Supervisory Council.All members of the Supervisory Council are elected by the General Meeting of the shareholders for a term of fouryears, which is due to expire in July 2017. The re-election of the Supervisory Council is expected to take place onor about 16 July 2017. The Issuer expects that, following this re-election process, the Republic will maintain twomembers on the Issuer’s Supervisory Council (nominated by the Ministry of Finance). The Shareholder has recentlyconfirmed to the Issuer on 22 June 2017 that it will ensure that the best principles of corporate governance (includingthe corporate governance principles of the Organisation for Economic Co-operation and Development and theNasdaq Vilnius Stock Exchange which the Issuer adheres to) will be followed in the formation of the newSupervisory Council to be elected on or about 16 July 2017 to ensure the continuity of the Group's strategy, itsresults of operations and its management structure and transparency. Accordingly, the Issuer does not expect thisre-election to have a material impact on the Group’s business. The Chairman of the Supervisory Council is electedfrom the members of the Supervisory Council. This model of formation of the Supervisory Council complies withthe principles of corporate governance (see “—Corporate Governance”).

The Supervisory Council’s powers include, among other powers, the power to:• elect and remove members of the Board of Directors. The next re-election of the members of the Board of

Directors is expected to take place on or about 22 July 2017. The Issuer does not expect this re-election to havea material impact on the Group’s business;

• supervise the activities of the Board of Directors and the Chief Executive Officer;• provide comments to the General Meeting of the Issuer’s shareholders on the Issuer’s strategy, financial

statements, appropriation of profit or loss, and the annual report; and• provide the opinion to the Board of Directors regarding the election of individuals to the management or

supervisory bodies of the Issuers subsidiaries.

Generally, the Supervisory Council makes decisions by a simple majority of all its members. Under the Issuer’sArticles of Association, the Supervisory Council makes decisions by a majority of two thirds of its members incertain circumstances, such as decisions to adopt procedural rules of the supervision of Directors. The quorum fora meeting of the Supervisory Council is a simple majority of its members. Each Supervisory Council member hasone vote. When necessary in matters of urgency, a decision may be made by the Supervisory Council without holdinga meeting. At its discretion, the Supervisory Council may invite members of the other governing bodies, employees,or other persons to its meetings.

In accordance with the Issuer’s Articles of Association, the Supervisory Council meets once a month. In 2016, therewere 12 regular and 2 extraordinary meetings. The Board of Directors and the Chairman of the Board of Directorsregularly attend the meetings.

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None of the members of the Supervisory Council has any ownership interest in the capital of the Issuer or the Group.

The business address of each member of the Supervisory Council of the Group is „Lietuvos energijaˮ, UAB, Žvejųg. 14, LT-09310, Vilnius, the Republic of Lithuania. As of the date of this Base Prospectus, the below mentionedmembers of the Supervisory Council of the Group do not have potential conflicts of interest between any duties tothe Group and their private interests or other duties.

Set out below are the members of the Supervisory Council as of the date of this Base Prospectus:Date of

Name Born Position appointment–––––––––––––––––––––––––––––– –––––––– ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– ––––––––––––––––

Šarūnas Kliokys 1959 Chairman and Independent Member of the Supervisory Council 19/07/2013Antanas Danys 1975 Independent Member of the Supervisory Council 19/07/2013Dr. Virginijus Lepeška 1955 Independent Member of the Supervisory Council 19/07/2013Tomas Garasimavičius 1978 Member of the Supervisory Council 19/07/2013Rasa Noreikienė 1959 Member of the Supervisory Council 19/07/2013Agnė Bagočiutė 1977 Member of the Supervisory Council 02/05/2016

Šarūnas Kliokys. Mr. Kliokys is the Chairman of the Supervisory Council and an independent member. He isChairman of the boards of Ekonovus UAB, Avestis UAB; and Kilimai AB, as well as a member of the boards of thestate enterprise Centre of Registers, and the association EUROCHAMBERS and President of the LithuanianChamber of Commerce, Industry and Crafts. Mr Kliokys obtained his diploma in Economics at Vilnius Universityand a Master’s degree in Business Administration (EMBA) at Vytautas Magnus University.

Antanas Danys. Mr. Danys is an independent member of the Supervisory Council. He is also the Chairman of theRisk Management Supervision Committee. He is a director of Grinvest PTE LTD and Asian Pacific Green EnergyPte. Ltd. He is Development Director of Kaštonų Kalva UAB. He is chairman of the Board of Directors of NeoFinance UAB and a members of the boards of Lanestead OU and Balaef OU. Mr. Danys obtained his Bachelor’sdegree at Boston College, followed by a Master’s degree in Business Administration (MBA) from Vilnius University.

Dr. Virginijus Lepeška. Dr. Lepeška is an independent member of the Supervisory Council. He is also Chairmanof the Appointment and Remuneration Committee. He is a consultant and chairman of the board of OrganizacijųVystymo Centras UAB and a consultant at OVC Mokymai UAB. He is an adviser to the chairman of the board ofVilandra UAB and to the General Manager of AL Holdingas UAB. He is a member of the board of the AssociationMentor Lietuva and of the public institution Paramos Vaikams Centras. He is also a member of the Commission forthe Selection of Candidates for Judges. Dr. Lepeška obtained his doctoral degree in Social Sciences from VilniusUniversity.

Tomas Garasimavičius. Mr. Garasimavičius is a member of the Supervisory Council, having been appointed bythe Office of the Government of the Republic of Lithuania. He is also a member of the Risk Management SupervisionCommittee and the Appointment and Remuneration Committee. Mr. Garasimavičius is an advisor to the PrimeMinister of Lithuania on energy matters. He obtained his Bachelor’s degree in Political Science from VilniusUniversity before going on to complete Masters’ degrees in Political Science from Vilnius University and CreightonUniversity.

Rasa Noreikienė. Ms. Noreikienė is a member of the Supervisory Council, having been appointed by the Ministryof Economy of the Republic of Lithuania. She is also Chair of the Audit Committee. Ms. Noreikienė was DeputyMinister at the Ministry of Economy. She qualified as a lawyer at Vilnius University before going on to obtain aMaster’s degree in Public Administration from Kaunas University of Technology.

Agnė Bagočiutė. Ms. Bagočiutė is a member of the Supervisory Council, having been appointed by the Ministryof Finance of the Republic of Lithuania. She also a member of the Appointment and Remuneration Committee.Ms. Bagočiutė was Deputy Minister at the Ministry of Finance until December, 2016. She currently holds the positionof Senior Adviser to the Ministry of Finance. She obtained her Bachelor’s degree in Public Geography at VilniusUniversity before obtaining a Master’s degree in General Geography and Landscape Science.

Committees of the Supervisory CouncilThe Supervisory Council has formed three committees:(i) the Risk Management Supervision Committee;(ii) the Audit Committee; and(iii) the Appointment and Remuneration Committee.

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Where appropriate, the Issuer may also form other ad hoc committees (e.g. to address specific issues, or to prepare,supervise or coordinate strategic projects, etc.). The committees of the Supervisory Council provide their conclusions,opinions and proposals to the Supervisory Council within their competence. A committee consists of at least threemembers, of whom at least one member is a member of the Supervisory Council and at least one member is anindependent member. None of the members of any of the committees of the Supervisory Council have any sharesin the Issuer or any company in the Group.

Risk Management Supervision CommitteeThe Risk Management Supervision Committee is responsible for the submission of conclusions or proposals to theSupervisory Council on the functioning of management and control system in the Group and the main risk factorsand implementation of risk management or prevention measures. Its main functions are:(a) to monitor the identification, assessment and management of risks relevant for the accomplishment of goals of

the Issuer and the Group companies;(b) to assess the relevance of internal control procedures and risk management measures with respect to the

identified risks;(c) to assess the status of implementation of risk management measures;(d) to monitor the implementation of risk management process;(e) to analyse financial possibilities for the implementation of risk management measures;(f) to assess the risks and risk management plan of the Issuer and the Group companies;(g) to assess the regular risk identification and assessment cycle;(h) to control the establishment of risk registers, analyse their data and provide proposals;(i) to monitor the drafting of risk management related internal documents; and(j) to perform other functions attributed to the competence of the Committee by the Supervisory Council.Set out below are the members of the Risk Management Supervision Committee as at the date of this BaseProspectus:Name Position Outside role–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––––––––––––––––––––

Antanas Danys Chairman of the Committee, independent member Director of Grinvest PTE.LTDRaimundas Petrauskas Independent member of the Committee General Manager of Schmitz

Cargobull Baltic UABDonatas Kaubrys Independent member of the Committee Director of Dovirma UABTomas Garasimavičius Member of the Committee Adviser to the Prime Minister of

Lithuania for EnergyAudit CommitteeThe Audit Committee is responsible for the submission of the objective and impartial conclusions or proposals tothe Supervisory Council on the functioning of the audit and control system in the Group. Its main functions are:(a) to monitor the process of preparation of financial statements of the Issuer and the Group companies, with a

special focus on the relevance and consistency of accounting methods used;(b) to monitor the effectiveness of internal controls and risk management systems of the Issuer and the Group

companies, to analyse the need for and relevance of these systems and perform the review of the existing internalcontrol management systems;

(c) to monitor the adherence to the principles of independence and objectivity by the certified auditor and auditfirm, to provide related recommendations, as well as proposals for the selection of an audit company;

(d) to monitor the audit performance processes of the Issuer and the Group companies, to examine the effectivenessof audit and response of the administration to the recommendations provided in the management letter;

(e) to monitor the effectiveness of the internal audit function of the Issuer and the Group companies, to analyse theneed for and relevance of this function, to provide recommendations on the need for, effectiveness of the internalaudit function, and on other internal audit related matters;

(f) to perform regular reviews of the structure, size, composition and activities of the management and supervisorybodies of the Issuer and the Group companies, appointment and dismissal of the head of a structural unitperforming the functions of the internal audit, approval of his (her) job description, imposition of incentivesand penalties;

(g) to monitor the compliance of activities of the Issuer and the Group companies with laws and other legal acts ofthe Republic of Lithuania, relevant Articles of Association and operational strategy;

(h) to assess and analyse other issues attributed to the competence of the Committee by the decision of theSupervisory Council; and

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(i) to perform other roles related to the functions of the Committee set forth by legal acts of the Republic ofLithuania and in the Corporate Governance Code of companies listed on the Nasdaq Vilnius Stock Exchange.

Set out below are the members of the Audit Committee as at the date of this Base Prospectus:Name Position Outside role–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––––––––––––––––––––

Rasa Noreikienė Chair of the Committee and independent member Ministry of Economy of the of the Committee Republic of Lithuania, former Vice-

MinisterDanielius Merkinas Independent member of the Committee Finance Director of Nordnet UABAušra Vičkačkienė Member of the Committee Ministry of Finance of the Republic

of Lithuania, Director of the AssetManagement Department

Gintaras Adžgauskas Member of the Committee Director of the LithuanianCommittee of the World EnergyCouncil

Irena Petruškevičienė Independent member of the Committee Member of Audit DevelopmentCommittee of the EuropeanCommission

Appointment and Remuneration Committee

The Appointment and Remuneration Committee is responsible for the submission of conclusions or proposals onthe matters of appointment, removal or promotion of the Board Members to the Supervisory Council, also for theassessment of activities of the Board of Directors and its members and for issuing the respective opinions. Thefunctions of the committee also cover the formation of the common remuneration policy at the Group level,establishment of the amount and composition of remuneration, principles of promotion, etc. Its main functions are:(a) to assess and provide proposals on the long-term remuneration policy of the Issuer and Group companies (the

main fixed part of the remuneration, performance based remuneration, pension insurance, other guarantees andforms of remuneration, compensation, termination benefits and other parts of the remuneration package),principles of compensation for costs related to the individual’s performance;

(b) to assess and provide proposals on the policy of bonuses to employees of the Issuer and the Group companies;(c) to monitor the compliance of the policy of remuneration and bonuses to employees of the Issuer and the Group

companies with the international practice and good governance practice recommendations, and providerespective proposals for the improvement of the policy of remunerations and bonuses;

(d) to provide proposals concerning bonuses upon appropriation of profit (losses) to be appropriated of the Issuerand the Group companies in the respective financial year;

(e) to assess the terms and conditions of agreements of the Issuer and the Group companies with members of themanagement bodies of the Issuer and the Group companies;

(f) to assess the procedures of recruitment and selection of candidates to members of the boards and seniormanagement of the Issuer and the Group companies and establishment of the qualification requirements;

(g) to perform regular reviews of the structure, size, composition and activities of the management and supervisorybodies of the Issuer and the Group companies;

(h) to supervise how members of management bodies and employees of the Issuer and Group companies are notifiedof the professional development possibilities and how to upgrade their skills regularly;

(i) to supervise and assess the implementation of measures ensuring the continuity of operations of the managementbodies and employees of the Issuer and the Group companies; and

(j) to perform other functions attributed to the competence of the Committee by the Supervisory Council.

Set out below are the members of the Appointment and Remuneration Committee as at the date of this BaseProspectus:Name Position Outside role–––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––––––––––––––––––––

Virginijus Lepeška Chairman and independent member of the Chairman of the Board of DirectorsCommittee of Organizacijų Vystymo Centras

UABTomas Garasimavičius Member of the Committee Advisor to the Prime Minister of

Lithuania for EnergyAgnė Bagočiutė Member of the Committee Ministry of Finance of the Republic

of Lithuania, Chief Advisor

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Board of Directors

The members of the Board of Directors are elected for a term of four years and removed by the Supervisory Councilon the proposal of the Appointment and Remuneration Committee. The Board of Directors consists of five membersand elects the Chairman of the Board of Directors—the Chief Executive Officer of the Issuer—from among itsmembers. The members of the Board of Directors, acting within their competence, must ensure the properperformance of the Issuer’s activities/supervision of the respective areas at the Group level.

The Board of Directors makes decisions by a simple majority of the votes of all its members. A quorum is presentwhen at least 4 members of the Board of Directors is present at a meeting. Each member of the Board of Directorshas one vote. When necessary in matters of urgency, a decision may be made by the Board of Directors withoutholding a meeting. The Board of Directors has discretion to invite to its meetings members of the other governingbodies, employees, or other persons.

In accordance with the Issuer’s Articles of Association, certain decisions of the Board of Directors require the priorconsent of the Supervisory Council before they can be implemented, and the Board of Directors is required to submitsuch decisions to the Supervisory Council for discussion and request its opinion.

The Issuer’s Articles of Association provide that the Board of Directors shall comprise five members. The Board ofDirectors is obliged to meet at least once a fortnight. In practice, however, meetings are held almost weekly and atotal of 68 meetings took place in 2016.

None of the members of the Board of Directors has any ownership interest in the capital of the Issuer or the Group.

The business address of each member of the Board of Directors of the Group is „Lietuvos energijaˮ, UAB, Žvejųg. 14, LT-09310, Vilnius, the Republic of Lithuania. As of the date of this Base Prospectus, the below mentionedmembers of the Board of Directors of the Group do not have potential conflicts of interest between any duties to theGroup and their private interests or other duties.

Set out below are members of the Board of Directors as of the date of this Base Prospectus:Date of

Name Born Position appointment–––––––––––––––––––––––––––––– –––––––– ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– ––––––––––––––––

Dr. Dalius Misiūnas 1978 Chairman of the Board of Directors and Chief Executive Officer 22/07/2013Ilona Daugėlaitė 1970 Member of the Board of Directors and Organisational 22/07/2013

Development DirectorDarius Kašauskas 1972 Member of the Board of Directors and Finance and 22/07/2013

Treasury DirectorMindaugas Keizeris 1980 Member of the Board of Directors and Strategy and 22/07/2013

Development DirectorDominykas Tučkus 1981 Member of the Board of Directors and Production 02/01/2016

and Services Director

Dr. Dalius Misiūnas. Dr. Misiūnas is the Chairman of the Board of Directors and the Chief Executive Officer. Heis also Chairman of the Supervisory Council of Energijos Skirstymo Operatorius AB, a member of the Board ofDirectors of the Association Eurelectric, President of the Lithuanian Power Association, President of the AlumniAssociation of Kaunas University of Technology, a member of the Board of Directors of the Sponsorship Fund ofthe Issuer and a member of the Council of the Lithuanian Confederation of Industrialists. He received his Bachelor’sdegree in Electrical Engineering from Kaunas University of Technology before attending Lund University wherehe obtained a Master’s degree in Industrial Electrical Engineering and Automatics and a doctoral degree inTechnological Sciences.

Ilona Daugėlaitė. Ms. Daugėlaitė is a member of the Board of Directors and the Organisational DevelopmentDirector. She is also a member of the Supervisory Council of Energijos Skirstymo Operatorius AB and ElektroniniųMokėjimų Agentūra UAB and Chair of the Boards of Directors of Technologijų ir Inovacijų Centras UAB, DuomenųLogistikos Centras UAB and VAC. She holds a Master’s degree in Hydrogeology and Engineering Geology fromVilnius University.

Darius Kašauskas. Mr. Kašauskas is a member of the Board of Directors and the Finance and Treasury Director.He is Chairman of the Boards of Directors of NTV and Duomenų Logistikos Centras UAB, and also a member ofthe Board at Elektroninių Mokėjimų Agentūra UAB. Following his Master’s degree in Economics from VilniusUniversity, he obtained a further Master’s degree in Management from ISM University of Management andEconomics, and has undertaken doctoral studies in the field of economics at the same university.

Mindaugas Keizeris. Mr. Keizeris is a member of the Board of Directors and the Strategy and DevelopmentDirector. He is Chairman of the Supervisory Council of LEG and Chairman of the Boards of Directors of EnePRO

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and Vilniaus Kogeneracinė Jėgainė UAB. He is also a member of the Board of Directors of the Sponsorship Fundof the Issuer. Mr Keizeris obtained his Bachelor’s degree in Business Administration and Management and hisMaster’s degree in International Business at Vilnius University.

Dominykas Tučkus. Mr. Tučkus is a member of the Board of Directors and the Production and Services Director.He is also the Chairman of the Board of Directors of LITGAS, a member of the Supervisory Councils of LEG andElektroninių Mokėjimų Agentūra UAB and a member of the Boards of Directors of LDT, Energijos Tiekimas, HOBOU, Tuuleenergia OU and EURAKRAS UAB. He obtained his degree in Business Management and Administrationand his Master’s degree at L. Bocconi University in Italy.

Chief Executive Officer and Division Heads

At the executive employees’ level, the Group is managed by the Chief Executive Officer and the Division Heads.The business address of the Chief Executive Officer and Division Heads is Žvejų g. 14, LT-09310, Vilnius, Lithuania.

Neither the Chief Executive nor any of the Division Heads has any ownership interest in the capital of the Issuer orthe Group.

The business address of each member of the Chief Executive and Division Heads of the Group is „Lietuvos energijaˮ,UAB, Žvejų g. 14, LT-09310, Vilnius, the Republic of Lithuania. As of the date of this Base Prospectus, the belowmentioned Chief Executive and Division Heads of the Group do not have any potential conflicts of interest betweenany duties to the Group and their private interests or other duties.

Set out below are the Division Heads as of the date of this Base Prospectus:Date of

Name Born Position appointment–––––––––––––––––––––––––––––– –––––––– ––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– ––––––––––––––––

Dr. Dalius Misiūnas 1978 Chief Executive Officer 22/07/2013Ilona Daugėlaitė 1970 Organisational Development Director 22/07/2013Darius Kašauskas 1972 Finance and Treasury Director 22/07/2013Mindaugas Keizeris 1980 Strategy and Development Director 22/07/2013Dominykas Tučkus 1981 Production and Services Director 22/07/2013

Dr. Dalius Misiūnas. Dr. Misiūnas is the Chief Executive Officer. For more information on Dr. Misiūnas, pleasesee “—Board of Directors”.

Ilona Daugėlaitė. Ms. Daugėlaitė is the Organisational Development Director. For more information on Ms.Daugėlaitė, please see “—Board of Directors”.

Darius Kašauskas. Mr. Kašauskas is the Finance and Treasury Director. For more information on Mr. Kašauskas,please see “—Board of Directors”.

Mindaugas Keizeris. Mr. Keizeris is the Strategy and Development Director. For more information on Mr. Keizeris,please see “—Board of Directors”.

Dominykas Tučkus. Mr. Tučkus is the Production and Services Director. For more information on Mr. Tučkus,please see “—Board of Directors”.

Corporate Governance

The aim of the Group, with the Republic of Lithuania as its shareholder, is to ensure effective and transparentoperations. In order to achieve this aim, the reorganisation of governance was carried out in 2013, during which thecorporate governance of the Group was reorganised and improved.

The new governance structure and model of the Group has been developed on the basis of the most advancedinternational and national practices, following the recommendations published by the Organisation for EconomicCooperation and Development, having regard to the Corporate Governance Code of companies listed on the NasdaqVilnius exchange and Guidelines on the Governance for State-owned Enterprises recommended by the BalticInstitute of Corporate Governance. The corporate governance model of the Group was implemented in observanceof the Corporate Governance Guidelines approved by the Ministry of Finance of the Republic of Lithuania on 7 June2013 (the Guidelines are available at www.le.lt).

The Governance Coordination Centre recognised the Group as the best managed State capital entity in 2015, 2014in 2013. High scores were given for transparency and management.

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RELATED PARTY TRANSACTIONS

The relationships between the Group and its related parties, identified according to the principles of InternationalAccounting Standard 24 (“IAS 24”), primarily consist of business transactions relating to the sale and purchase ofproducts, goods and services. They fall within the activities carried out by the Group in the ordinary course of itsbusiness. Please see Note 10 of the Interim Financial Statements, Note 37 of the 2016 Financial Statements andNote 37 of the 2015 Financial Statements for information on the Group’s related party transactions conducted insuch respective periods.

The Group’s transactions with its related parties are regulated by Lithuanian Law on Companies, Articles ofAssociation and transfer pricing documents, which provides for comprehensive regulation of rules concerning relatedparty transactions and conflicts of interest between a company and members of its Board of Directors or SupervisoryCouncil (and persons close to such members).

As the sole shareholder of the Issuer is the Republic of Lithuania represented by the Lithuanian Ministry of Finance,the Group’s related party transactions are transactions with the Republic of Lithuania, associates and all entitiescontrolled by or under significant influence of the Republic of Lithuania, and key management and their close familymembers.

In the Issuer’s opinion, all agreements with related parties are conducted on an arm’s length basis and the Issuerbelieves that all of the transactions between the Group and related parties have taken place at market prices.

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REGULATION

Below is a brief summary of the rules and regulations applicable to the Group in the Republic of Lithuania as theGroup’s principal market. Since Lithuania’s accession to the E.U. on 1 May 2004, certain rules and regulations ofthe E.U. have been adopted and, therefore, a description of the E.U. Legislation as applicable to the Group is alsoincluded. The following summary does not purport to be complete and is subject to the regulations of the jurisdictionsreferred to below.

E.U. Legislation

History of Energy Regulation

As a member of the E.U. (a “Member State”), the Republic of Lithuania is required to adhere to E.U. energylegislation which has developed in order to establish a competitive, secure and environmentally sustainable energymarket in Europe.

The E.U. Commission (the “Commission”) began regulating the E.U. energy market by enacting the “First EnergyPackage” which was comprised of Directive 96/92/EC Concerning Common Rules for the Internal Market inElectricity (the “E.U. First Electricity Directive”) and Directive 98/30/EC Concerning Common Rules for theInternal Market in Natural Gas (the “E.U. First Gas Directive”). The E.U. First Electricity Directive and the E.U.First Gas Directive were designed to provide non-active suppliers with access to the internal electricity and gasmarkets of E.U. Member States and to allow for better competition in these markets. In June 2003, the E.U. EnergyCouncil repealed the E.U. First Electricity Directive and the E.U. First Gas Directive by adopting the “SecondEnergy Package” comprising of Directive 2003/54/EC Concerning Common Rules for the Internal Market inElectricity and repealing Directive 96/92/EC (the “E.U. Second Electricity Directive”) and Directive 2003/55/ECConcerning Common Rules for the Internal Market in Natural Gas and repealing Directive 96/92/EC (the “E.U.Second Gas Directive”).

The E.U. Second Electricity Directive required each E.U. Member State to allow for full competition within itsinternal commercial and residential electricity markets by 1 July 2004 and 1 July 2007, respectively. The E.U.Second Electricity Directive also set forth general rules for the organisation of the E.U. electricity market, such asthe option for Member States to impose certain public service obligations, customer protection measures andprovisions for monitoring the security of electricity supply in the E.U.; the establishment of a regulatory body,independent from any interests of the electricity and gas industries, which would be required to ensure non-discriminatory network access, monitor the level of competition and ensuring the efficient functioning of theelectricity generation, distribution, and trade market; and the implementation of so-called “legal unbundling”meaning that each transmission and distribution system operator had to be separated, at least in terms of legal form,organisation and decision-making, from other activities in the energy sector not relating to transmission ordistribution.

The E.U. Second Electricity Directive further focused on enhancing customer rights by granting household customersthe right to be supplied with electricity of a specified quality at reasonable and transparent prices that are easy tocompare. Moreover, it required electricity suppliers to provide their end-users with information on the energy sourcesand kinds of fuel used in the production of supplied electricity and on the environmental impact of the supplier’sactivities, including the amount of carbon dioxide and radioactive waste produced.

Similar to the E.U. Second Electricity Directive, the E.U. Second Gas Directive, adopted on 26 June 2003, requiredeach Member State to allow for full competition within its internal commercial and residential gas markets by1 July 2004 and 1 July 2007, respectively. With regard to the establishment of an independent regulatory authorityand the process of legal unbundling, the E.U. Second Gas Directive sets forth similar rules as the E.U. SecondElectricity Directive.

Current E.U. Energy Regulation

E.U. Energy and Climate Change Legislation

The Commission published its paper entitled “An Energy Policy for the European Union” in December 1995 witha primary focus on market integration. In 2006, this was followed by a green paper on “A European Strategy forSustainable, Competitive and Secure Energy”. This was revised in two communication “packages” in 2007 and2008. In March 2007, the European Council adopted an Action Plan and the Commission started to proposelegislation from September 2007.

In 2007, the Commission published a proposal for the establishment of a new energy policy and a strategy forachieving a more integrated and competitive energy market within the E.U. designed to ensure a stable energy

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supply and combat climate change, such “E.U. Energy and Climate Change Legislation” set certain targets (knownas the 20-20-20 goal), including:

• further liberalisation of electricity markets;

• a reduction of at least 20 per cent. in greenhouse gas emissions by 2020;

• for renewable energies to make up a 20 per cent. share of E.U. energy consumption by 2020; and

• 20 per cent. energy savings by 2020 compared to 2020 projections (1853 million tonnes of oil equivalent) madein 2007.

Subsequently, in 2009 the E.U. adopted the E.U. Energy and Climate Change Legislation “Third Energy Package”which includes (besides the climate change related legislation described below), but is not limited to, Directive2009/72/EC Concerning Common Rules for the Internal Market in Electricity and repealing Directive 2003/54/EC(the “E.U. Third Electricity Directive”), Directive 2009/73/EC Concerning Common Rules for the Internal Marketin Natural Gas and repealing Directive 2003/55/EC (the “E.U. Third Gas Directive”), Regulation (EC) No.713/2009 Establishing an Agency for the Cooperation of Energy Regulators, Regulation (EC) No. 714/2009 onConditions for Access to the Network for Cross-border Exchanges in Electricity and repealing Regulation (EC) No1228/2003 (the “E.U. Regulation on Cross-Border Exchanges”) and Regulation (EC) No. 715/2009 on Conditionsfor Access to the Natural Gas Transmission Networks repealing Regulation (EC) No 1775/2005 (the “E.U. NaturalGas Transmission Regulation”). These directives and regulations were collectively designed to complete theliberalisation of the electricity and gas markets within the E.U. In particular, such energy legislation contemplatesthe further separation of supply and production activities from transmission network operations. To achieve thisgoal, Member States are able to choose, subject to the respective conditions set forth in the E.U. Third ElectricityDirective and the E.U. Third Gas Directive, between the following three options:

• Full ownership unbundling: This option entails vertically integrated undertakings selling their gas and electricitygrids to an independent operator, which will carry out all network operations. This option applies to newundertakings;

• Independent System Operator (the “ISO”): Under this option, vertically integrated undertakings maintain theownership of the gas and electricity grids, but they are obliged to designate an independent operator for themanagement of all network operations. This option may apply to existing undertakings; and

• Independent Transmission Operator (the “ITO”). This option is a modification of the ISO option wherebyvertically integrated undertakings do not have to designate an ISO, but need to abide by strict rules ensuringseparation between supply and transmission. This option may apply to existing undertakings.

Lithuania has chosen to implement the full ownership unbundling model in the electricity and gas sectors withregards to TSOs. Distribution system operators remain under the same shareholders. The provisions of the ThirdEnergy Package were transposed into the Law on Electricity of the Republic of Lithuania, the Law on Natural Gasof the Republic of Lithuania and the Law on LNG Terminal of the Republic of Lithuania in 2011-2012.

The E.U. energy legislation, as aforesaid, also enhanced consumers’ rights by establishing the right for consumersto (i) change electricity or gas supplier (the process of switching must be completed within three weeks), and receivethe final closure statement at the latest six weeks after the switch; (ii) obtain compensation if quality targets are notmet; (iii) receive information on supply terms through bills and company websites; and (iv) see complaints dealtwith in an efficient and independent manner.

Finally, the E.U. Energy and Climate Change Legislation provides for the creation of an agency within the E.U. forthe coordination of national energy regulators, which will issue non-binding framework guidelines for nationalagencies. This task was assigned to the Agency for the Cooperation of Energy Regulators. It is expected that thiswill result in a more harmonised energy regulation environment across the E.U.

2030 E.U. Framework for Climate and Energy Policy

In October 2014, the E.U. Energy Council enacted new targets and the architecture for the E.U. framework forclimate and energy in the period from 2020 to 2030. The new targets are:

• a reduction of at least 40 per cent. in greenhouse gas emissions by 2030, compared to 1990 levels (the totalgreenhouse gas emissions cap will be reduced by 2.2 per cent. each year from 2021, compared with the 1.74 percent. annual reduction in the period from 2013 to 2020);

• 27 per cent. of E.U. energy consumption by 2030 (resulting in renewable energy sources being used in thegeneration up to 47 per cent. of electricity consumed in the E.U.);

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• to increase in E.U. wide energy efficiency by 27 per cent. (this target is still indicative); and

• to achieve 10 per cent. electricity interconnection by 2020.

In July 2015, the Commission proposed to revise the E.U. Emission Trading Scheme (the “E.U. ETS”) from 2020.An Innovation Fund and Modernisation Fund will be established to help the power sector meet the innovation andinvestment challenges of the transition to a low-carbon economy. Free allowances will continue to be available tomodernise the power sector in lower-income Member States. In addition, the legislative proposal on a market stabilityreserve was approved in October 2015. The placing of allowances in the reserve will operate from 1 January 2019.

Cross-Border Trading of Electricity

Besides focusing on the liberalisation of the internal energy markets in every Member State, E.U. energy regulationis also designed to improve the cross-border trade of electricity. Accordingly, the E.U. has also implementedRegulation (EC) No. 1228/2003 (“Regulation (EC) No. 1228/2003”) on Conditions for Access to the Network forCross-border Exchanges in Electricity. This Regulation required the establishment of a committee of national expertschaired by the Commission to adopt the guidelines on (i) inter-transmission system operator compensation forelectricity transit flows; (ii) the harmonisation of national transmission charges; and (iii) network congestionmanagement. Regulation (EC) No. 1228/2003 established a fund mechanism to cover the costs resulting from cross-border trades, whereby the TSOs contribute to a fund according to their net physical import and export flows. Thedistribution of the accumulated funds then depends on the transit volume.

Although Regulation (EC) No. 1228/2003 was partially successful, the Commission adopted a subsequent Regulationon Cross-Border Exchanges. The E.U. Regulation on Cross-Border Exchanges repealed Regulation (EC) No.1228/2003 and established the rules designed to alleviate cross-border exchange difficulties, with a view toimproving competition and harmonisation in the internal E.U. electricity market.

The E.U. Regulation on Cross-Border Exchanges created the European Network of Transmission System Operators(“ENTSO-E”), which comprises the designated TSO from all Member States, which have a duty to put in place theinformation exchange mechanisms in order to ensure the security of networks in the context of congestionmanagement.

The costs related to the activities of ENTSO-E are borne by the TSOs which host cross-border flows of electricityon their networks. In return, they receive compensation from the TSOs from which cross-border flows originate.Charges for access to networks are applied by operators as well.

Legislative proposals to implement the new market design were planned for 2016. On 23 February 2017 theCommission adopted the Proposal for a Regulation of the European Parliament and of the Council on the InternalMarket for Electricity. The key objectives of the legislation were to better link wholesale and retail markets,strengthen regional cooperation, increase cross-border trade, and develop short-term and long-term markets to sendpositive signals in relation to investments for modern technologies to both producers and consumers of electricity.

Energy Infrastructure

Gas Infrastructure Legislation

In November 2005, the Commission adopted Regulation (EC) No. 1775/2005 (“Regulation (EC) No. 1775/2005)”on Conditions for Access to the Natural Gas Transmission Networks, which covered access to all transmissionnetworks in the E.U. and addressed a number of issues such as: access charges (which reflect the actual costsincurred), third party access services, capacity allocation mechanisms, congestion management, balancing andimbalance charges, secondary markets and information and confidentiality provisions. Regulation (EC)No. 1775/2005 established a committee of national energy experts with the authority to revise the rules annexed tothe Regulation. In July 2009, it was replaced by the E.U. Natural Gas Transmission Regulation which was adoptedas a part of the E.U. Energy and Climate Change Policy.

Development of Legislation

The E.U. Natural Gas Transmission Regulation complements the E.U. Third Gas Directive and stipulates rules fornatural gas transmission networks, gas storage and liquefied natural gas facilities. It concerns access to infrastructure(by determining the establishment of tariffs for access to networks), services to be offered, allocation of capacity,transparency and balancing of the network. It provides for access to maximum network capacity as well as storageand liquefied natural gas facilities for all market participants. Infrastructure operators have a duty to implement andpublish non-discriminatory and transparent congestion-management procedures.

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In the same way that the E.U. Regulation on Electricity Cross-Border Exchanges created ENTSO, it created theEuropean Network of Transmission System Operators for Gas (the “ENTSO for Gas”), comprised of gastransmission network operators from all Member States.

On 30 April 2015, in order to further encourage and facilitate efficient gas trading and transmission across gastransmission systems within the E.U., and thereby to move towards greater internal market integration, theCommission issued Regulation (E.U.) 2015/703 Establishing a Network Code on Interoperability and Data ExchangeRules.

Security of Electricity Supply

In 2006, the E.U. adopted Directive 2005/89/EC concerning measures to safeguard security of electricity supplyand infrastructure investment (the “Directive on the Security of Supply”), which requires that E.U. Member Statesensure a high level of security of electricity supply by taking necessary measures to facilitate a stable investmentclimate. The Directive on the Security of Supply stipulates that the TSOs set minimum operational rules andobligations for network security, which may then require approval by the relevant authority. Member States mustalso prepare, in close cooperation with the TSOs, a system adequacy report according to the E.U. reportingrequirements. Member States were required to transpose the E.U. Directive on the Security of Supply into nationallaw by 24 February 2008. Lithuania transposed this directive into the Law on Energy from 1 January 2009.

By the end of 2016, the Commission had introduced a new regulation on the security of electricity supply, designedto enhance transparency, ensure a common approach and better address cross-border in relation to the security ofelectricity supply. This instrument is planned to be fully integrated with the redesign of the electricity market asproposed by the Commission on 23 February 2017 in the Proposal for a Regulation of the European Parliament andof the Council on the E.U. internal market for electricity.

Security of Gas Supply

Following the Russian-Ukrainian gas crisis of January 2009, Regulation (EU) No. 994/2010 concerning measuresto safeguard the security of gas supply and repealing Council Directive 2004/67/EC (the “E.U. Gas SupplyDirective”) was adopted in order to strengthen the prevention and crisis response mechanisms.

The E.U. Gas Supply Directive imposed a number of new rules designed to prevent or mitigate potential disruptionto gas supplies. These included risk assessment mechanisms, preventive action plans and emergency plans, a dutyto ensure gas supplies to households for at least 30 days under severe conditions and enhancing flexibility of thegas infrastructure (including enabling bi-directional physical capacity on cross-border interconnections).

On 16 February 2016, the Commission submitted a proposal to the European Parliament for a Regulation of theEuropean Parliament and of the Council concerning Measures to Safeguard the Security of Gas Supply andRepealing Regulation (E.U.) No 994/2010. This draft regulation proposes stronger regional coordination, withcertain principles and standards being set at the E.U. level. The proposed approach is that Member States shouldcooperate closely within their regions when conducting regional risk assessments. To ensure E.U.-wide consistency,regional risk assessments have to be conducted on the basis of an E.U.-wide simulation, with common standardsand a specific scenario. Risks identified through the regional risk assessments will be addressed in regionalpreventative action plans and emergency plans, to be peer-reviewed and approved by the Commission. To ensurethat risk assessments and plans are comprehensive and consistent with one another, the draft regulation sets outmandatory templates listing aspects that must be taken into account when conducting a risk assessment and drawingup the plans. The draft regulation also improves the application of the supply standard to protected customers (mainlyhouseholds) and the infrastructure standard (the possibility of supplying gas even if the largest infrastructure is notavailable). Finally, it enables permanent bi-directional capacity and proposes the introduction of additionaltransparency measures concerning gas supply contracts. It is expected that the regulation could be adopted in thesecond half of 2017.

Proposed Changes for Energy Infrastructure

In 2011, the Commission launched a proposal for a Regulation on the Guidelines for Trans-European EnergyInfrastructure which should ensure completion of strategic energy networks and storage facilities by 2020. Thegeneral objective of this initiative is to ensure the sufficient and timely development of energy infrastructures acrossthe E.U. and neighbouring countries in order to facilitate the continuous and unrestricted cross-border flow of energy.

To this end, the Commission has identified 12 priority corridors and areas covering electricity, gas, oil and CO2

transport networks. Several of Lithuania’s gas and electricity interconnection projects are included in the BalticEnergy Market Interconnection Plan in gas and the Baltic Energy Market Interconnection Plan in electricity.

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In October 2013, on the basis of Regulation (E.U.) No. 347/2013, effective from June 2013, the Commissionapproved a list of approximately 250 key projects in the field of energy infrastructure – the “Projects of commoninterest”. These key projects will benefit from a more expedient permit-granting process and better regulatoryconditions and access to financial assistance from the Connecting Europe Facility, with the aim of speeding-up therealisation of such projects and increasing their attractiveness to investors.

Renewable Energy Sources

The E.U. made commitments to reduce greenhouse gas emissions under the Kyoto protocol for reducing greenhousegas emissions (the “Kyoto Protocol”). Under the Kyoto Protocol, promotion of electricity from renewable energysources, meaning electricity produced from non-fossil renewable energy sources such as wind power, solar power,geothermal power, wave power, tidal power, hydroelectric, biomass and biogas became a priority for the E.U. Tothis end, in 2009 the E.U. institutions adopted Directive 2009/28/EC on the Promotion of the Use of Energy fromRenewable Sources (and amending and subsequently repealing Directives 2001/77/EC and 2003/30/EC) (the “E.U.Renewable Energy Directive”) as a part of the E.U. Energy and Climate Change Legislation.

The E.U. Renewable Energy Directive establishes a target for each the Member State reflecting their differentstarting points and potential for increasing renewables production based on the contribution of renewable energy totheir gross final consumption for 2020. This target is in line with the 20-20-20 goal for the E.U. as a whole.

The Commission is expected to present the proposal for the new E.U. Renewable Energy Directive and the bioenergysustainability policy for 2030, which is expected to provide a framework for achieving the binding E.U.-level targetof at least 27 per cent. renewable energy by 2030.

E.U. Emissions Trading Scheme (“E.U. ETS”)

The E.U. ETS is a cornerstone of the E.U.’s policy to combat climate change and its key tool for reducing industrialgreenhouse gas emissions cost-effectively.

The first, and still by far the biggest, international system for trading greenhouse gas emission allowances, the E.U.ETS covers more than 11,000 power stations and industrial plants in 31 countries, as well as airlines. In 2020,emissions from sectors covered by the E.U. ETS are expected to be 21 per cent. lower than in 2005. UnderCommission proposals, by 2030, they would be 43 per cent. lower. Launched in 2005, the E.U. ETS is now in itsphase III, running from 2013 to 2020. A major revision approved in 2009 in order to strengthen the system meansthat phase III will be significantly different from phases I and II. It is based on rules that are far more harmonisedthan those upon which phases I and II were based.

A single E.U. wide cap on emissions applies in place of the previous system of national caps. Auctioning, not freeallocation, is now the default method for allocating allowances. For those allowances still given away for free, theharmonised allocation rules apply and are based on the ambitious E.U.-wide benchmarks for emissions performance.

300 million allowances are set aside in the New Entrants Reserve (the “NER 300”) to fund the deployment ofinnovative renewable energy technologies and carbon capture and storage through the NER 300 programme (thelargest funding programmes for innovative low-carbon energy demonstration projects.) The system covers emissionsof carbon dioxide (“CO2”) from power plants, a wide range of energy-intensive industry sectors and commercialairlines. Nitrous oxide emissions from the production of certain acids and emissions of perfluorocarbons fromaluminium production are also included.

Energy Efficiency Directive

On October 25 2012, the E.U. adopted the Directive 2012/27/EU on Energy Efficiency amending Directives2009/125/EC and 2010/30/EU and repealing Directives 2004/8/EC and 2006/32/EC (“Directive 2012/27/EU onEnergy Efficiency”), building on the Energy Efficiency Plan 2011. This Directive establishes a common frameworkof measures for the promotion of energy efficiency within the E.U. in order to achieve the E.U. target for 20 percent. increase in energy efficiency and to pave the way for further energy efficiency improvements beyond thatdate. It lays down rules designed to remove barriers in the energy market and overcome market failures that impedeefficiency in the supply and use of energy, and provides for the establishment of indicative national energy efficiencytargets for 2020.

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The Directive 2012/27/EU on Energy Efficiency was transposed in Lithuania’s national legislation in stages byadopting or amending the following legal acts:

• The Energy Resource and Efficient Energy Consumption Monitoring Order approved by the Governmentdecision No. 332 dated 30 March 2016. This decision sets the requirements for the long-term strategy for therenovation of the national building stock;

• The Public Building Energy Efficiency Development Programme adopted by the Government decision No.1328 dated 26 November 2014. The aim of this programme is to increase energy efficiency in public buildingssaving 60 GWh of primary energy by the end of 2020. This programme will also ensure renovation of at least3 per cent. of the total floor area of the public buildings owned by state or local authorities;

• The Energy Efficiency Requirements for Purchasing Organisations When Purchasing Goods, Services orBuildings approved by the Government Decision No. 621 dated 17 June 2015;

• The Law on Increase of Energy Consumption Efficiency, adopted by the Parliament of the Republic of Lithuania,No. XII-2702 dated 11 November 2016. This law introduces an energy efficiency obligation system andcombines it with other alternative measures to achieve the energy saving target by 2020; and

• As well as other legal acts, such as the Law on Energy, the Law on Heat Sector, the Law on Electricity and theLaw on Natural Gas.

CO2 Emissions

The European Energy Strategy establishes a number of headline targets for climate change and energy sustainabilitypertaining to the main targets of a 20 per cent. reduction in E.U. greenhouse gas emissions as compared to 1990levels until 2020, and a 40 per cent. reduction by 2030.

The Lithuanian National Strategy for Climate Change Management Policy sets out the action plan for itsimplementation and defines measurable indicators for CO2 reduction. As indicated above, it estimates the annualreduction of CO2 emissions and the total reduction for the year 2020 as short-term climate change mitigation goalsand also establishes a target to decrease CO2 emissions by 8.53 million tons by 2020 within the sectors participatingin the scheme for greenhouse gas emission allowance trading.

Additionally, the Operational Programme for E.U. Structural Funds Investments for 2014-2020 for Lithuania setsgoals for the reduction of total annual greenhouse gas emissions, which imposes a target of 400,000 tons of CO2

equivalent by 2023.

Transparency of Wholesale Electricity, Gas and Emission Allowances Trading

Wholesale gas and electricity prices are highly sensitive to the variations in production and transmission capabilities.Prices may be influenced by (i) the spread of false information on the availability of these capabilities or (ii) a fallin production. To detect and prevent such electricity and gas wholesale manipulations of markets, the E.U. enactedRegulation (EC) No. 1227/2011 on Wholesale Energy Market Integrity and Transparency (the “REMIT”), which,inter alia:

• prohibits the use of inside information when buying or selling on the wholesale energy markets;

• prohibits manipulative transactions and the spreading of incorrect information that give false or misleadingsignals about supply, demand, or prices;

• obliges energy traders to report their transaction data to the Agency for the Cooperation of Energy Regulators(the “ACER”). These data include the price, volumes, date and time of transactions, the name of the seller, thename of the buyer, and any other beneficiaries; and

• makes the ACER responsible for the independent monitoring of all wholesale energy trades. If market abuse issuspected, the ACER will request national regulators to investigate. It will also coordinate cross-borderinvestigations.

The E.U. also enacted Regulation (EC) No. 596/2014 on market abuse market abuse regulation) and repealingDirective 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC,2003/125/EC and 2004/72/EC (the “MAR”) to detect and prevent market manipulation and insider dealing onmarkets with emissions allowances (including public markets and auctions of emission allowances). The MARintroduced the following tools to prevent the aforesaid practices with respect to emission allowances:

• obligation on market participants to publish inside information relating to emissions allowances;

• obligation on market participants to prepare insider lists;

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• obligation on market participants to disclose managers’ transactions;

• obligation on market operators and investment firms (banks, brokers) to report suspicious transactions withemissions allowances;

• prohibition on the use of inside information when buying or selling emissions allowances at auction or on publicmarkets; and

• Prohibition on manipulative transactions and the spreading of incorrect information that gives false or misleadingsignals about supply, demand, or prices.

The obligations to publish inside information, prepare insider lists and to disclose managers’ transactions will applysolely to market participants emissions allowances above certain aggregate year CO2 emissions or (ii) rated thermalinput thresholds. These thresholds will be set by the Commission.

The Commission has prepared a new energy prices and costs report (published in 2016) providing an overview ofthe cost of energy, taxes, levies and subsidies. This should contribute to a more informed discussion on differentenergy price levels in Member States, the different components of energy prices, their influence on thecompetitiveness of European industry and investment in Europe and in their ability to influence consumer behaviour.As a first step, on 18 November 2015, the Commission presented a proposal for a Regulation of the EuropeanParliament and of the Council on European Statistics on Natural Gas and Electricity Prices and repealing Directive2008/92/EC a procedure to improve the transparency of gas and electricity prices charged to industrial end-users.

Legislation: the Republic of Lithuania

General Overview

The Lithuanian energy sector is governed by a wide range of laws and regulations which also implement theEuropean legislation described above. The key law focusing solely on the energy sector is the Law on Energy ofthe Republic of Lithuania (“the Law on Energy”) which was enacted in 1995 (a new version was enacted in 2002)and contains provisions implementing applicable E.U. legislation. The main provisions of the Law on Energy covergeneral energy-related activities, the basic principles of energy development and management, the effectiveness ofenergy and energy resources. The main legislative tools used by the Republic of Lithuania in the regulation of theenergy market are as follows:

• the Law on Energy from Renewable Sources of the Republic of Lithuania governs the State management,regulation, supervision, and control of activities in the renewable energy sector, as well as designating the energynetwork operators, renewable energy producers under state regulation, their supervision, and control of theirrelationship with the performing institutions;

• the Law on Electricity of the Republic of Lithuania establishes the basic principles governing the management,transmission, organisation, control and supply of electricity, regulation of electricity producers, service providersand consumers, and introduces the provisions for the regulation of the State electricity sector, their supervisionand control of institutions of mutual relations of electricity generation, transmission, distribution, supply andconsumers’ legitimate rights and interests;

• the Law on Energy Market Resources of the Republic of Lithuania establishes the basic principles for theorganisation, administration, regulation, supervision and control of the Lithuanian energy resources market,governing the trade in biofuels and natural gas and providing auxiliary protection against fluctuations in theprice of energy in public relations;

• the Law on Heat Sector of the Republic of Lithuania regulates the State management of heat, the operator’sactivities, its relationship with consumer’s, networking, and responsibility;

• the Law on Financial Instruments for Climate Change Management establishes the persons engaged in economicactivities resulting in greenhouse gas emissions, and the rights, duties and responsibilities of public institutions,the competence of the bodies from which these are comprised, as well as key requirements for the issue,suspension of validity, lifting of suspension and revocation of fluorinated greenhouse gases managementcertificates;

• the Law on Natural Gas of the Republic of Lithuania establishes the natural gas transmission, distribution,storage, liquefaction and supply-related relationships. This law establishes the rules relating to the organisationand functioning of the natural gas sector, natural gas market access, as well as the transmission, distribution,storage, liquefaction and licensing to supply natural gas, as well as licences to engage in market operator activity.This law also establishes the instruments designed to ensure proper supply of natural gas to ensure the reliabilitylevel and develop a common market in the E.U.;

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• the Law on Liquefied Natural Gas Terminal of the Republic of Lithuania establishes the general principles andrequirements for the launch of the liquefied natural gas terminal in the Republic of Lithuania, its performanceand operation and the form of legal, financial and organisational conditions for a liquefied natural gas terminalproject; and

• various secondary legislation which provides a framework for procedural aspects of the implementation of theLaw on Energy and other laws.

Regulatory Authorities

The main regulatory institutions in the Lithuanian energy market are:

• the Government which develops and implements the State policy in the energy sector; approves the Stateregulated pricing principles; cooperates with foreign institutions in the energy market; represents the Republicof Lithuania in international organisations; and approves the energy market licensing rules;

• the Ministry of Energy which is responsible for the implementation of the National Energy Strategy, draftingenergy supply related laws, implementation of the investment policy in the energy sector and developing arenewable energy sector in Lithuania;

• the NCC whose purpose is to ensure effective competition in the energy market and prevent discriminationbetween different customers and suppliers. The NCC is also responsible for setting the caps for State regulatedenergy prices/tariffs and approving the purchase price for electricity generated from renewable energy sources.The NCC’s objectives include: (as far as possible within the limits of its prescribed role) to perform the functionsof the State regulating district heating, natural gas, centralised supply of liquefied petroleum gas, electricity,renewable energy, drinking water supply and wastewater treatment sectors, to supervise and exercise controlover regulated district heating, natural gas, centralised supply of liquefied petroleum gas, electricity, renewableenergy, drinking water supply and wastewater treatment undertakings, as well as the proper implementationand upholding of consumer rights, and ensuring fair competition in the energy, drinking water and wastewatertreatment sectors;

• the State Energy Inspectorate under the Ministry of Energy of the Republic of Lithuania (the “Inspectorate”),which exercises the State control over energy facilities and energy equipment in Lithuania. It’s main purposeis to ensure the reliable, efficient and secure generation, supply and use of energy resources and energy. TheInspectorate issues licences for energy market activities, ensures compliance with the requirements for theinstallation and reconstruction of energy facilities; draws up the certificates granted to new installations;investigates accidents affecting the installations; exercises control over energy facilities, and over safety,performance, power of energy equipment, and reliability and efficiency of energy generation, transmission,distribution and supply; and

• the Ministry of Environment of the Republic of Lithuania is the main managing authority of the Government,which forms the country’s State policy of environmental protection, forestry, utilisation of natural resources,geology and hydrometeorology, territorial planning, construction, provision of residents with housing, utilitiesand housing, as well as coordinates its implementation.

Electricity Sector

Licensing Regime

In the electricity energy sector the following activities are licensed (licences are issued by the NCC): transmission,distribution, and public supply. A public supply of electricity is carried out on the basis of legal obligation, inparticular if a consumer has not chosen the electricity supplier or such supplier does not provide services, theelectricity supply is guaranteed by the distribution system operator. Currently, this function is performed by theState-owned company ESO which is also the distribution network operator of electricity and natural gas (the “DSO”).The licences are issued for an unlimited period of time, except when the TSO is not yet licensed. In such cases atemporary licence for 12 (twelve) months is issued in order to ensure system reliability and stability. Requirementsfor companies seeking obtain a specific licence are defined in the Licensing rules for activities in electricity sector,adopted on 20 June 2012 by the Government. Persons, wishing to get, change, specify, issue a duplicate, stop orcancel certain licences must submit an application to the NCC and follow other requirements defined in the Licencingrules for activities in the electricity sector. Charges for these services are indicated in the rules approved by theGovernment.

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Electricity Generation

Authorisation to Construct Power Plants

If a company wishes to construct a power plant with an installed electricity generation capacity, it must obtain anauthorisation from the Inspectorate. Alongside the request submitted to the Inspectorate, the company should providean environmental impact assessment report, health impact assessment, and the grid connection conditions receivedfrom the TSO or DSO. The procedure is simplified if the capacity of the facility is 10 MW or less. A permit is notnecessary if a person intends to construct or develop the power plant facility with a capacity not exceeding 10 MWto produce electricity for private use.

Emission Charges

Lithuania has been successfully implementing its commitments to reduce the emissions of greenhouse gas by 8 percent. below 1990 level during the period of 2008-2012 under the Kyoto Protocol-. By 2010, the greenhouse gasemissions in Lithuania had been reduced by 58 per cent. as compared to 1990. In order to ensure the implementationof the E.U. climate change policy milestones designated for short-term (by 2020), midterm (by 2030 and 2040) andlong-term (by 2050) the Strategy for National Climate Change management Policy for 2013-2050 and the Plan ofMeasures for its Implementation have been adopted by Lithuania.

Emission Limits

Pursuant to Decree No. D1-528 of the Minister of Environment dated 15 July 2013, which implemented E.U.Directive 2010/75/EC on industrial emissions (on Integrated Pollution Prevention and Control) (the “IndustrialEmissions Directive”) requires that Lithuania, as a Member State must impose more stringent NOX, sulphur dioxideand dust emission limits on combustion plants. The specific level of such emission limits depends on various factors,including total rated thermal input, the type of fuel used by the combustion plant or the date on which such plantwas put into operation (or was granted a permit).

In December 2013, the Commission introduced the “Clean Air Policy Package” to reduce emissions and air pollutionwithin the E.U. The package, inter alia, includes proposals for directives on (i) the reduction of national emissionsof certain air pollutants by stipulating stricter national emission ceilings in the period from 2020 to 2030, providedthat Member States will be obliged to propose the measures to meet these ceilings (the proposal for this directivewas withdrawn by the Commission in December 2014); and (ii) the limitation of emissions of certain air pollutantsemitted by medium combustion as a supplement to E.U. Directive 2010/75/EC on industrial emissions. The firstproposal is still in the legislative process, as the European Parliament returned it for reconsideration to the committeeresponsible for the proposal, and the second proposal has been enacted as E.U. Directive 2015/2093 and is to beimplemented by Member States by 19 December 2017.

Exceptions to the Emission Limits

Directive 2010/75/EC of the European Parliament and of the Council on industrial emissions lays down the ruleson integrated prevention and control of pollution arising from industrial activities to prevent or, where that is notpracticable, to reduce emissions into the air, water, and land and to prevent the generation of waste. This Directiveimposes tighter emissions standards on existing combustion plants with a thermal input greater than 50 MW from2016. During the period from 1 January 2016 to 30 June 2020, Member States may draw up and implement atransitional national plan covering combustion plants which were granted their first integrated pollution preventionand control permit before 27 November 2002 or the operators of which had submitted a complete application for apermit before that date, provided that the plant was put into operation no later than 27 November 2003. For eachcombustion plant, the plan must cover the emissions of one or more of the following pollutants: nitrogen oxides,sulphur dioxide, and dust. For gas turbines, only nitrogen oxides emissions are covered by the plan.

The Government, taking into account the reasonable concerns of the companies operating combustion plants, tookadvantage of the above provisions of the Directive allowing the submission of a transitional national plan to theCommission. This step was aimed at postponing the implementation of emissions standards until 30 June 2020 withrespect to combustion plants included in the plan. This postponement is necessary to allow market participants toplan and allocate necessary investments without causing significant disproportionate price increase for consumers.

The following combustion plants are included in the plan submitted to the Commission: Kaunas Combined Heatand Power Plant, Combined Heat and Power Plant No. 2 of Vilniaus Energija (two pollution sources), CombinedHeat and Power Plant No. 3 and Ateities District Boiler House No. 8, Alytus District Boiler House of AlytausEnergija branch of Litesko and Marijampolė District Boiler House of Marijampolės Šiluma.

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The Commission evaluated Lithuania’s plan according to the established rules and approved it on 11 December2013. The air pollution abatement measures listed in the plan must be implemented between 1 January 2016 and30 June 2020 thereby ensuring the compliance with the annual thresholds of emissions of sulphur dioxide, nitrogenoxide and particulate matter specified in the plan for that period.

Since the plan is applicable to Lithuania, the requirements for each combustion plant laid down in the plan will beincorporated in the terms of the integrated pollution prevention and control permit issued to the particular plant.These permits are issued by the Ministry of Environment pursuant to the order approved by the Minister ofEnvironment.

Carbon Compliance (Emission allowances)

History of Carbon Compliance Phase II

There are two sets of targets to evaluate: (1) the Kyoto Protocol targets for the period 2008-2012 (which has justended) and (2) the 2020 targets for emissions not covered by the E.U. ETS.

Under the Kyoto Protocol, the emission reduction target for Lithuania for the period 2008-2012 were set at minus8 per cent. based on 1990 levels of CO2, CH4 and N2O. Lithuania successfully fulfilled these commitments.According to the National Greenhouse Gas Inventory Report 2012, greenhouse gas emissions amounted to20.809 million tons of CO2 (excluding the land use, land use change and forestry sectors) in 2010, which is58 per cent. less than the level of the greenhouse gas emissions produced in 1990, which equalled 49.430 milliontons of CO2.

Current Carbon Compliance—Phase III

Directive 2009/29/EC amending Directive 2003/87/EC so as to improve and extend the greenhouse gas emissionallowance trading scheme of the Community dated 23 April 2009, set out the basis for Phase III to the E.U. ETS,which began on 1 January 2013. Phase III introduced significant changes of the E.U. ETS, including (i) auctioningas the default method for allocation of emission allowances, (ii) a longer trading period (8 years, compared to 5 yearsunder Phase II) and (iii) a greater harmonisation of the rules relating to the emissions allowances allocation. Inaddition, E.U. Member States no longer submit their national allocation plans for approval. In their place, theCommission set a single E.U. wide cap for available emission allowances. The cap for the year 2013 was 2.08 billionper annum; from 2013 until 2020, the cap is decreased each year by 1.74 per cent. of the average annual total quantityof emissions allowances issued by Member States between 2008 and 2012, which, in absolute terms, is an annualreduction of approximately 38.3 million emission allowances.

Allocation of Emissions Allowances During Phase III

With effect from 1 January 2013, Phase III rules prohibit the allocation of emissions allowances for free to electricityproducers. In general, the electricity producers have to buy emissions allowances at auction or on the E.U. ETSmarket. From 2013, more than 40 per cent. of the emissions allowances are to be sold through auctions and thisproportion will progressively increase in the following years.

There is an option for 10 E.U. Member States to provide electricity producers with transitional allocations ofemissions allowances for free, if the conditions under Article 10(c) of the E.U. Directive 2003/87/EC, Establishinga Scheme for Greenhouse Gas Emission Allowance Trading within the Community and amending Council Directive96/61/EC (the “E.U. Directive 2003/87/EC”) are satisfied (the “Derogation”). The E.U. legislation requireselectricity producers which benefit from this exemption, to invest in the modernisation of their power plants. Thevalue of these investments must mirror at least the value of the allocation of emissions allowances allocated forfree. The transitional period expires on 31 December 2019. The E.U. Council communicated that it will considerfurther transitional allocation of emissions allowances until 2030.

To strengthen the functioning of the emission allowances market in the period from 2013 to 2020, the Commissionhas the power to amend the timetable of emissions allowances auctions (the back-loading of emissions allowances).To mitigate the negative impacts of an imbalance between supply of and demand for emission allowances on theE.U. ETS market, the Commission decided, in February 2014, to decrease the amount of the emissions allowanceto be auctioned in 2014, 2015 and 2016 by 400, 300 and 200 million of the emissions allowances, respectively.According to E.U. decision of the European Parliament and of the Council in October 2015, allowances which havenot been or will not be auctioned in 2014, 2015 and 2016 will be transferred to a market stability reserve that shalloperate from January 2019. The reserve should address both the surplus of emission allowances and improve thesystem’s resilience to major shocks by adjusting the supply of allowances to be auctioned. The effectiveness of the

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market stability reserve will depend on the terms of a compromise reached among the E.U. Parliament, the E.U.Council and the Commission.

Renewable Energy Sources

History of Renewable Energy Sources

On 10 January 2007, the Commission launched its Climate and Energy Package for the E.U. to achieve a 20 percent. reduction in greenhouse gas emissions by 2020. Based on the E.U. Renewable Energy Directive, Lithuaniahas undertaken to increase the share of renewable energy sources (the “RES”) in national energy consumption byup to 23 per cent. by 2020 and to increase the share of the RES in all modes of transport by up to at least 10 percent. of consumption in the transport sector. The Law on Energy from Renewable Sources contains sectoralobjectives: to increase the share of electricity produced from RES by up to at least 20 per cent. of nationalconsumption, to increase the share of centrally supplied heat energy produced from RES by up to at least 60 percent. of the heat energy balance, and to increase the share of RES used in households by up to at least 80 per cent.of the total energy consumption balance.

It should be noted that on 12 May 2011, the Law on Renewable Energy Resources of the Republic of Lithuaniacame into force, which listed as its the key objective to reach the stage where a minimum of 23 per cent. of thecountry’s overall final energy consumption is met by the use of RES. Under this law, the NCC was granted powersof regulation, surveillance and control over RES. In accordance with its new powers, the NCC passed and amendedmultiple legal acts.

Current Legislation

The main Lithuanian provisions relating to RES are set out in the Law on Renewable Energy Sources of the Republicof Lithuania. This legislation sets out how electricity from renewable sources is to be promoted mainly through asliding feed-in tariff. The RES plants with installed capacity exceeding 10 kW acquire the guaranteed tariff ratesthrough tenders. The producers of renewable electricity may also be eligible to apply for subsidies and loans fromthe Lithuanian Environmental Investment Fund and the Climate Change Special Programme, and are exempt fromexcise duty.

Renewable electricity generation in Lithuania is mostly supported by the feed-in tariff. A feed-in tariff is a minimumguaranteed unit price for electricity paid to the generators of electricity from RES which goes to supply publicelectricity grids. All electricity produced by renewable energy plants whose total installed capacity does not exceed10 kW must be purchased at the tariff set by the NCC. Tariff rates are set by the NCC on a quarterly basis. Exceptfor electricity generated from geothermal power, all forms of renewable electricity generation are eligible for thissupport scheme. In 2011, the Law on Energy from Renewable Sources introduced a cap on feed-in tariff paymentsfor each eligible form of renewable electricity generation. This means that only a limited amount of electricityproduced with a particular form of renewable electricity generation will be supported through the feed-in tariffscheme.

Guaranteed tariffs for renewable energy plants with a total installed capacity of more than 10 kW are awarded inauctions organised by the NCC. Each quarter the NCC sets the maximum tariff for the subsequent tender procedures.

Amendments to the Law on Renewable Energy Resources of the Republic of Lithuania came into force on 1 February2013. As part of these, the NCC approved amendments to the Methodology for Setting the Tariffs of ElectricityProduced by Using Renewable Energy Resources (approved on 22 February 2013, No. O3-41). The most importantchanges include the following:

• the tariffs must be recalculated four times per year. Originally, the tariffs for electricity produced by using RESwere set for a year. The definition of a small power plant was changed: the installed capacity of a small powerplant was limited to a maximum of 10 kW;

• the tariffs for excess electricity are to be applied to small power plants, and they must not be approved moreoften than 4 times per year. Before the amendments, the fixed tariffs were applied;

• the installed capacity of the connected facilities has been changed; and

• with regard to the fast improving technologies, the increase of their efficiency was replaced by the technologicalcapacity ratios.

In 2015, the share of RES in the total energy balance of the country reached up to 25.86 per cent.

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Transmission and Distribution of Electricity

History

A special purpose joint stock company Lietuvos energija was established in 1995. In 2001, the shareholders resolvedto restructure Lietuvos energija, which was divided into a number of separate independent companies: LietuvosElektrinė, AB; Mažeikių Elektrinė, AB; Rytų Skirstomieji Tinklai, AB; Vakarų Skirstomieji Tinklai, AB. Lietuvosenergija, UAB continued to operate as a transmission network operator and market operator. Liberalisation of theelectricity sector in Lithuania began with the implementation of the Law on Electricity of the Republic of Lithuaniain 2002. The vertically integrated company Lietuvos energija, UAB was divided into a separate transmissioncompany, two distribution companies and two generation companies. Regulated third party access to the grid wasensured pursuant to the requirements of the Third Energy Package. The Law on Electricity of the Republic ofLithuania was amended in 2004 in order to ensure compliance with the requirements of the E.U. Second ElectricityDirective that all commercial consumers would be free to choose a supplier. In 2009, Litgrid, AB was establishedas a new subsidiary of Lietuvos energija. The company was mainly responsible for electricity transmission. In theelectricity sector, the ownership unbundling model was chosen by Lithuania to unbundle the State-owned TSOLitgrid, AB. Lithuania, thus, made use of the possibility provided for in Article 9(6) of the Electricity Directive toimplement the ownership unbundling model by means of separate public bodies within the State.

Current Structure

Currently, following the implementation of the Third Energy Package in the electricity sector, Lithuaniantransmission and distribution systems in the electricity sector are structured as follows:

• The TSO Litgrid, AB is a subsidiary of the State holding company EPSO-G, UAB which owns 97.5 per cent.of the shares in Litgrid AB, with the remaining 2.7 per cent. of shares owned by minority shareholders. EPSO-G,UAB is controlled by the Ministry of Energy of the Republic of Lithuania.

• The distribution system operator ESO is a subsidiary of the Issuer, which owns 94.98 per cent. of the shares inESO, with the remaining 5.02 per cent. of shares owned by minor shareholders. The full ownership unbundlingmodel has been implemented in the electricity transmission system.

• The management, accounting and legal unbundling models have been implemented in the distribution system.

• The Law on Electricity provides that all customers be given the option to choose an independent electricitysupplier. The customer’s choice is unrestricted except in instances where a customer’s facility corresponds onlyto a particular category of capacity. With effect from 1 January 2015, customers have been free to choose (andchange) electricity supplier and this market is fully liberalised.

• Public electricity supply, which is provided by the distribution system operator ESO, AB, ensures a guaranteedsupply of electricity to customers that have not chosen an independent electricity supplier or whose chosensupplier fails to fulfil its obligations.

Participants

As per the above, the following categories of electricity market participants now operate in Lithuania:

• electricity generators (producers);

• the transmission grid operator (Litgrid, AB);

• the distribution system operator (ESO);

• electricity traders; and

• end-consumers.

Price of Electricity

The public electricity price and tariffs are set by the public supplier for six calendar months. Electricity is suppliedto customers by both public and independent suppliers.

The electricity price currently consists of the following elements: the electricity purchase price; the transmissionprice; the PSO fee; distribution costs; the difference between the public supply price and the actual electricitypurchase price, on the one hand, and the estimated electricity price in the previous period. The electricity purchaseprice is market based. By contrast, the transmission price is regulated by the NCC which sets upper price caps. Theactual price (not to exceed the cap set by the NCC) is determined by the electricity TSO Litgrid, AB.

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The PSO fee is paid for services which are in the public interest, as designed by the Government. According to theLaw on Electricity of the Republic of Lithuania in order to implement the strategic goals of the national energy,economic and environmental policies and guarantee services which are on the public interest, the Government, inaccordance with the provisions of the laws regulating the legal framework governing the operation of this and otherenergy sectors, may determine that the services which are in the public interest include:

• the generation of electricity from RES;

• the generation of electricity in a co-generation mode in combined power and heat generation plants where theseplants supply heat to the heat systems and amount of energy saved is such that the combined heat and powergeneration may be considered cost effective;

• the production of electricity in plants whose electricity generation is deemed necessary to ensure the securityof the energy supply;

• ensuring that a reserve of electricity system is maintained in plants whose operation is deemed necessary toensure the energy security of the State;

• the development of electricity generation capacities that are strategically important for ensuring the securityand reliability of the electricity system or energy independence of the State;

• the implementation of strategic electricity sector projects related to improving energy security by constructingnew interconnectors with the electricity systems of other countries and/or connecting the electricity system ofthe Republic of Lithuania with the electricity systems of other Member States;

• operations to ensure the safe operation of technical instruments and the management of radioactive waste;

• distribution costs which are regulated by the NCC setting maximum price caps. Particular prices not exceedingthe caps are determined by the electricity distributions system operator ESO; and

• public supply pricing which is regulated by the NCC setting maximum price caps. Particular prices not exceedingthe caps are determined by the service providers.

The sale prices and reserve prices of the electricity producers and independent suppliers are not regulated exceptfor cases when the NCC, after investigation, determines that such producer or independent supplier exercises asignificant enough market power that it may affect competition. For these market participants the NCC could imposecertain obligations. In 2012 the NCC has decided that LEG exercises a significant market power and determinedprice caps for reserve prices.

The NCC supervises the energy sector on behalf of the State, publishes the public electricity price and tariffs andlists of public and independent suppliers.

The NCC, in accordance with the Methodology on the Rate of Return on Investments, approved by the CommissionResolution No. O3-510 as of 22 September 2015, publishes data on the calculation of the rate of return oninvestments (the “WACC”). This Resolution applies to electricity, natural gas, heat and hot water supply sectorswhere state regulated prices are applicable. The data is to be used by electricity companies for setting the price capsfor the regulatory period of 2017-2021. For the calculation of the WACC, the following factors are taken intoconsideration: capped debt servicing costs expressed as a percentage, return on equity expressed as a percentage,share of equity capital (optimal capital structure), share of debt capital (optimal capital structure), and tax rate.

Trading

Wholesale trade in the domestic market for electricity is conducted using two methods: trading under bilateralagreements and trading on the electricity exchange. The aim is to make trading on the exchange the main methodby which wholesale electricity is supplied. Since 18 June 2012, wholesale trading on the Lithuanian ElectricityExchange has been administered by Nord Pool Spot AS, an operator of the Nordic and Baltic electricity exchanges.

Heating Energy Sector

The main legal acts regulating the heating energy sector are the Law on Heat Sector of the Republic of Lithuaniaand the National Heat Sector Development Programme for 2015-2021 (the “Heat Programme”) approved by theGovernment on 18 March 2015. The Heat Programme aims to assess and identify the primary objectives of theheating sector and the ways in which they can be implemented, taking into consideration domestic and internationaltrends in the environmental and energy sectors as well as economic conditions. Lithuania’s primary strategic goalin the heating industry is to increase the efficiency of heat generation, transmission and consumption, as well as

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(where economically reasonable), to replace imported natural gas used for the production of heat with sustainablelocal and renewable energy sources in order to reduce the costs of heat.

The Law on Heat Sector of the Republic of Lithuania requires the creation of effective competition in the heat sector.Therefore, it stipulates that heat suppliers must purchase from independent heat producers heat energy producedfrom renewable sources, as well as waste incineration and fossil fuel that fulfils environmental quality and reliabilityof supply requirements. The NCC sets rules and conditions for the purchase of heat from independent heat producers.In all cases, the price of heat energy purchased from independent heat producers cannot be higher than thecomparative heat production costs of the heat supplier.

Lithuanian legislation provides that the activities of all heat suppliers are regulated by the energy market regulator,i.e. the NCC. The NCC approves the maximum prices of heat suppliers.

There are two types of heat producers:

• regulated heat producers which own or control heat production or cogeneration facilities that are financed eitherby E.U. funds, national financing sources for renewable energy, a state or municipal grant or subsidy, or havereceived feed-in tariffs for electricity production and independent heat producers or a group of independentheat producers producing more than 1/3 of district heating per year;

• non-regulated independent heat producers which are not subject to the control of the NCC and may set heatprices at their own discretion.

The following requirements apply in respect of regulated independent heat producers:

• the separation and allocation of costs, and heat pricing determined by the NCC;

• that heat prices be based on essential (State-regulated) costs of production; and

• costs of heat are controlled by the NCC which sets the maximum price regulated that independent heat producerscan charge.

The NCC is engaged in the regulation of heat energy suppliers producing over 10 GWh of heat energy per year,while smaller heat suppliers are regulated by municipalities. A heat supplier and/or a regulated independent heatproducer must provide the NCC with a justification for their prices, which are to be approved by the NCC.

New heat producers are entitled to enter the district heating market (as independent heat producers regardless ofwhether they are regulated or not) if they get access to the district heating system. In this case, they must submit anapplication to the district heating supplier in order get a connection between a heat production facility and the districtheating system. The application must show that such a connection is feasible and complies with the economic andtechnical requirements of the district heating supplier.

A decision to refuse to provide a connection may be appealed to the NCC. In many cases, the NCC has overturneddecisions by district heating suppliers and granted the requests of potential independent heat producers. Therefore,entering the district heating production market should be seen as a realistic opportunity.

Licensing requirements

Heat suppliers must hold a licence for the supply of heat. The NCC issues licences to those supplying at least 10GWh of heat per year, taking into account recommendations provided by municipal authorities. It also has the powerto suspend licences, and exercise control over licensed activities. The licences for suppliers of heat who provideless than 10 GWh of heat per year can be issued, suspended or cancelled by the city municipality. If a heat producersells heat to a heat supplier, requirement to hold a licence is not applicable, but if a heat producer sells heat directlyto consumers, the producer must have a heat supply licence. Meanwhile, a permit granted by a municipality isrequired in order to sell electricity produced by a combined heat and power plant.

Participants

As per the above, the following categories of heat market participants operate in Lithuania:

• suppliers of district heating;

• non-regulated independent heat producers;

• regulated independent heat producers; and

• end-consumers.

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Heat Auctions

Heat is purchased through monthly auctions carried out by the district heating supplier. In this case, producers submittheir price proposals for the next month. The following requirements apply in all cases:

• the price of heat purchased from independent heat producers cannot be higher than the comparative heatproduction costs of the heat supplier; and

• the price of heat purchased from an independent producer cannot be higher than the calculated prime cost ofheat produced by an alternative heat source.

Gas Sector

The natural gas sector is governed by the E.U. Energy Regulation and, in particular, by the Third Energy Packagewhich has been transposed into the Law on Natural Gas of the Republic of Lithuania and the Law on the LNGTerminal of the Republic of Lithuania. Lithuania has chosen to implement the full ownership unbundling model inthe natural gas sector pursuant to the requirements of the respective Directives.

Licensing Regime

The following activities are licensed in the natural gas sector (licences are issued by the NCC):

• transmission;

• liquefaction;

• storage;

• distribution;

• system operator activities; and

• natural gas supply activities.

The licences are issued for an unlimited period of time. The NCC issues licences pursuant to the same security,reliability and non-discriminatory principles as applicable to the licensing regime for the electricity sector (pleasesee “—Electricity Sector—Licensing Regime”).

Transmission and Distribution of Gas History

The Lithuanian natural gas market is not integrated with other E.U. Member States. Lithuania has the only connectionwith Belarus which is used for constant supplies. The connection with Latvia is meant only for emergency cases,i.e. ensuring uninterrupted gas supply in the event of a supply failure in the sole gas connection with Belarus. It istherefore not used for common gas supply activities. The existing gas connection with Belarus has sufficient technicalcapacities to meet customer needs, but dependency on the single connection is not ideal.

Lithuania does not have its own natural gas resources. Gas used to be imported to Lithuania by a single importer,OAO Gazprom, and supplied mainly by Lietuvos Dujos, AB and Dujotekana, UAB. The wholesale sector of thenatural gas market did not see any significant changes until the liberalisation of the market in 2012 by the adoptionof the Law on the LNG Terminal of the Republic of Lithuania and amendments to the Law on Natural Gas of theRepublic of Lithuania.

The situation in the distribution market was similar to the one described above. Lietuvos dujos, AB had a 99 percent. share of the distribution market. Six other companies were entitled to engage in distribution activities butprovided distribution services only in individual regions, and their total share of the overall distribution marketmade up only 1 per cent.

On 10 April 2015, the NCC issued a statement that the gas transmission business ownership unbundling model ofAmber Grid, AB was broadly consistent with the applicable provisions of the E.U. Third Energy Package and theLaw on Natural Gas of the Republic of Lithuania. Amber Grid, AB was issued an open-ended gas transmissionbusiness licence and was designated as a TSO.

Lietuvos energija, UAB signed agreements with German company E.ON Ruhrgas International to acquire 38.9 percent. of the shares in Lietuvos Dujos, AB and 11.76 per cent. of the shares in LESTO, AB. Lietuvos energija, UABhas since acquired a further 40.03 per cent. of the shares in Lietuvos Dujos through a tender procedure and nowowns 96.63 per cent. of the shares in Lietuvos Dujos, AB.

ESO (the distribution system operator) was established in accordance with the terms of reorganisation approved bythe extraordinary meeting of shareholders of LESTO, AB and Lietuvos Dujos, AB on 3 December 2015 pursuant

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to which a contract was signed on 31 December 2015. On the basis of this contract, ESO took over all the assets,rights and obligations of LESTO, AB and Lietuvos Dujos, AB. ESO’s core line of business is electricity supply andelectricity and gas distribution.

Pursuant to the Regulation (EU) No. 994/2010 Concerning Measures to Safeguard the Security of Gas Supply andRepealing Council Directive 2004/67/EC, Member States were required to ensure that measures were taken by nolater than 3 December 2014, to ensure that in the event of disruption of the single largest gas infrastructure, thecapacity of the remaining infrastructure would be able to satisfy the total gas demand of the calculated area duringa day of exceptionally high gas demand.

The Law on the LNG Terminal of the Republic of Lithuania was enacted in June 2012 and amended in June 2013and November 2015. The Law on the LNG Terminal sets forth the general principles and requirements for theconstruction of the LNG Terminal in the territory of the Republic of Lithuania, its activities and operation, andestablishing the legal, financial and organisational conditions for the implementation of the LNG Terminal project.The LNG Terminal has enabled the diversification of Lithuania’s natural gas supply, increasing the security andreliability of this supply. The amendment to the Law on the LNG Terminal made in June 2013 provided that thebuilding costs of the LNG Terminal, its infrastructure and the connection, which cannot be financed from othersources available to Klaipėdos Nafta, AB, as well as all the fixed operating costs of the LNG Terminal, itsinfrastructure and connection are included in the natural gas transmission price in accordance with the procedureestablished by the NCC as a supplemental element of natural gas supply security. The supplemental element iscollected, administered and paid out to the LNG Terminal Operator or Klaipėdos Nafta, AB and designated supplier(LITGAS) by the natural gas TSO – Amber Grid, AB.

According to the amendment of the Law on the LNG Terminal of November 2015 reasonable costs incurred insupplying the required quantity of gas from the LNG Terminal are also included in the natural gas transmissionprice.

After the construction of the LNG Terminal in Klaipeda was finished, negotiations with Norwegian energy companyStatoil ASA were completed and a five-year LNG supply contract was signed by LITGAS, the designated supplier,in August 2014. Statoil ASA is viewed as a reliable partner for alternative gas supply to Lithuania, providingLithuania’s gas market participants with an opportunity to choose alternative gas suppliers. Moreover, in 2016, othermarket participants – Achema, AB and LDT – concluded gas supply contracts with Statoil ASA.

Current Structure

Following the implementation of the applicable E.U. legislation and the transposition of the Third Energy Package,the Lithuanian transmission and distribution systems are structured as follows:

• in October 2014, natural gas transmission activities were completely separated from vertically integratedcompany Lietuvos Dujos, AB which was controlled by OAO Gazprom, E.ON Ruhrgas International and theRepublic of Lithuania, and were transferred to a new company, Amber Grid, AB;

• Amber Grid, AB is the operator of Lithuania’s natural gas transmission system and is in charge of thetransmission of natural gas (transportation of natural gas through high-pressure pipelines) to system users, andthe operation, maintenance and development of the natural gas transmission system. Amber Grid, AB is ownedby UAB EPSO-G which holds 96.58 per cent. of its shares, with minority shareholders holding 3.42 per cent.of the shares;

• natural gas supply services were transferred to a new company, LDT, which has been ensuring the supply ofnatural gas to household customers, non-household customers and other consumers since 1 November 2014;

• natural gas distribution activities are carried out by ESO which was established by way of a merger betweenLESTO AB (which performed electricity distribution activities) and Lietuvos Dujos, AB (which acted as thenatural gas distribution system operator). ESO is controlled by the Issuer which holds 94.98 per cent. of itsshares, with minority shareholders holding the remaining 5.02 per cent.;

• on 27 November 2014, Klaipėdos Nafta, AB, which implemented the LNG Terminal project, received a naturalgas liquefaction licence and undertook the activities of the LNG Terminal operator in 2015;

• management, accounting and legal separation has been implemented in respect of the distribution systems; and

• GET Baltic, UAB was the only company holding a natural gas market operator’s licence in 2015. The mainfunctions of the market operator include the organisation of secondary trading of natural gas on the natural gasexchange.

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Price of Gas

Prices in the gas sector are either State-regulated or non-regulated. Prices are regulated by the setting of price capsby the NCC. In the natural gas sector, prices are regulated by setting price caps for transmission, liquefaction,storage, distribution, and guaranteed supply. By setting the exact service prices in the natural gas sector, the NCCregulates natural gas system balancing prices as well as the prices for the connection of new customers to the gassystem. The NCC sets the price caps for a five-year term. The prices may be adjusted by the NCC, but no more thanonce per year except in cases provided for by the Law on Natural Gas of the Republic of Lithuania. The law stipulatesthat gas undertakings must set their specific gas tariffs for household customers for a period of six months.

The gas tariff per cubic metre consists of the price of imported gas, the costs associated with gas delivery to thecustomer (transmission and distribution), funds required to ensure security and reliability, the profit margin set forthe supplier, and taxes.

The total price paid by the end customer consists of a variable tariff component calculated on the basis of consumedgas and fixed tariff component paid on a monthly basis in order to maintain the working capacity of the system andto ensure a reserve of power in the transmission pipelines, as each customer must be guaranteed to receive a qualityservice at any time. The fixed tariff includes expenditures on accounting and on the conclusion of contracts (priceof supply). The structure of the fixed gas tariff consists of the fixed component of the gas supply price, the fixedcomponent of the gas transmission price, and VAT.

Pursuant to the Methodology for Setting State-Regulated Prices in the Natural Gas Sector approved by ResolutionNo. O3-367 of the NCC of 13 September 2013, a price cap per capacity unit has been set and adjusted fortransmission activities and the pricing model of entry-exit points has been applied since 2015.

The NCC also sets the regulatory mechanism for the calculation of the additional natural gas supply securitycomponent of the transmission price covering the fixed LNG Terminal operation costs, the supply costs of thedesignated supplier, the difference between the price of acquisition of the minimum annual gasified natural gasvolume to ensure the mandatory activities of the LNG Terminal, the price of the sale thereof, and the administrationcosts of the LNG Terminal fund administrator. The security component is applied to natural gas system users and/ornatural gas consumers for the natural gas consumption capacities necessary for ensuring their maximum daily needsof natural gas at the delivery points.

Material Environmental and other Related Regulation

The Law on Environmental Protection of the Republic of Lithuania sets out the main rights and duties of legal andnatural persons in preserving biodiversity, ecosystems and the landscapes of the Republic of Lithuania to ensure ahealthy and clean environment, the rational use of natural resources in the Republic of Lithuania, its territorialwaters, continental shelf and economic zone, as well as liability and economic sanctions for legal persons committingenvironmental violations.

Integrated Pollution Prevention and Control

Directive 2008/1/EC of the European Parliament and of the Council Concerning Integrated Pollution Preventionand Control was adopted on 15 January 2008. In addition, Directive 2010/75/EU on Industrial Emissions (IntegratedPollution Prevention and Control) (the “Industrial Emissions Directive”) was adopted in 2010. The IndustrialEmissions Directive, among other things, provides that Member States must set up a system of environmentalinspections of the installations concerned and sets out the best techniques. Member States were required to transposethe Industrial Emissions Directive into their national law by 7 January 2013. Order No. D1-528 of the Minister ofEnvironment of the Republic of Lithuania “Regarding the Issuance and Withdrawal of Integrated PollutionPrevention and Control Permits” (the “IPPC Act”) has implemented the Industrial Emissions Directive.

This IPPC Act also lays down rules designed to prevent or, where that is not practicable, reduce emissions into theair, water, and land and to prevent the generation of unnecessary waste, in order to achieve a high level of protectionof the environment taken as a whole.

It should be noted that there are numerous other legal acts, such as the order of the Minister of Environment on theIssuance of Pollution Permits, the order of the Minister of Environment on the Waste Management Rules, etc. whichimplement the requirements for integrated pollution prevention and control.

General Liability

Under the legislation of the Republic of Lithuania and the E.U., liability can be administrative, criminal and civildepending on the damage to the environment. Liability for environmental damage can also be incurred under E.U.

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environmental law. In the Republic of Lithuania, liability for environmental damage is governed by the Law onEnvironmental Protection, the Code of Administrative Violations of Law, the Criminal Code and other legal acts.

The “Polluter Pays” Principle

The Lithuanian Law on Environmental Protection has transposed E.U. Directive 2001/42/EC of the EuropeanParliament into the legal system of the Republic of Lithuania for the assessment of the effects of certain plans andprogrammes on the environment.

In addition, the Law on Environmental Protection has implemented E.U. Directive 2004/35/CE on EnvironmentalLiability with regard to the Prevention and Remedying of Environmental Damage. The purpose of this Directive isto establish a framework of environmental liability based on the “polluter pays” principle, to prevent and remedyenvironmental damage.

One of the main legal acts of the Republic of Lithuania implementing the “polluter pays” principle is the Law ofthe Republic of Lithuania on Pollution Tax. It stipulates that the taxes relating to environmental pollution frommobile polluting sources must be paid by natural and legal persons that pollute the environment as a result of theireconomic and/or commercial activities.

The “polluter pays” principle is also laid down in other legal acts of the Republic of Lithuania, such as the Law onWaste Management, the Law on the Management of Packaging Waste, and in other legal acts.

The National Sustainable Development Strategy of the Republic of Lithuania provides that one of the main visionsof the State is to gradually transform the principles applied in the tax policy to comply with the “polluter pays”principle. Therefore, this principle is fully and properly implemented in the Republic of Lithuania.

Criminal Liability Towards the State

The Criminal Code of the Republic of Lithuania specifies crimes and criminal offences against the environmentand human health and provides for criminal liability of legal persons as well as natural ones. Offenders can bepunished by community service, a fine, restriction of liberty, arrest, or imprisonment for a term of up to three yearsor up to eight years for more serious crimes. The Criminal Code of the Republic of Lithuania provides for liabilityonly for the most dangerous crimes against the environment (i.e. illegal possession of ozone-depleting substancesor marine pollution from ships), which are not covered by other legislation. As previously mentioned, criminalliability applies to both natural and legal persons.

Civil Liability Towards a Third Party

As mentioned above, E.U. Directive 2004/35/CE has been implemented by the Lithuanian Law on EnvironmentalProtection. In addition, this Directive has implemented a strict liability doctrine under which civil liability forenvironmental offences is imposed on legal persons. The Lithuanian Law on Environmental Protection also providesthat civil liability is imposed regardless of the fault of legal persons for environmental damage, except in caseswhere damage to the environment is deemed negligible, i.e. the damage is insignificant.

Civil liability for environmental offenses may be applicable in conjunction with other forms of legal liability, i.e.criminal or administrative liability. Offenders found to be administratively or criminally liable are usually alsorequired to pay compensation for damage to the environment caused by unlawful acts.

Administrative Liability Towards the State

Administrative liability is an independent type of legal responsibility that applies to natural and legal persons thathave committed administrative violations. Administrative liability also entails statutory administrative sanctions toensure compliance with the requirements of environmental law, to deal with environmental offences, and to enforceenvironmental law.

The Lithuanian Law on Environmental Protection specifies the cases in which administrative liability forenvironmental damage is imposed on legal persons, including legal persons from other countries and otherorganisations and their subsidiaries. Such liability under the Lithuanian Law on Environmental Protection is imposedwhere offences do not result in criminal liability of legal persons. The main purpose of administrative liability is toimpose economic sanctions on legal persons for such breaches of environmental law.

The Code of Administrative Violations of Law of the Republic of Lithuania contains the highest number of provisionsrelated to environmental protection and liability for breaches. It is mainly applied to natural persons. However, thereare several offences for which legal persons are penalised under this legal act (in cases where the Criminal Codeand/or the Lithuanian Law on Environmental Protection do not provide for liability). Breaches of the Code of

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Administrative Violations of Law may result in fines ranging from EUR 30 to EUR 7,000. It should be noted thatliability for administrative offences may be imposed in the form of a prohibition to engage in certain activities whichimpact upon the environmental or confiscation of certain tools. The Code of Administrative Violations of Law alsoprovides for the restriction or suspension of the licences required to pursue some economic activities which havean environmental impact in Lithuania.

Directive on the Deployment of Alternative Fuels Infrastructure

In January 2013, the Commission proposed a directive requiring Member States to adopt national policy frameworksfor developing the market for alternative fuels and to ensure that minimum infrastructure is set up for their supplyin road and water-borne transport. Each Member State should ensure the establishment of a defined minimumnumber of recharging points for electric vehicles by the end of 2020 (at least 10 per cent. of them publicly accessible).Ports should be equipped with shore-side electricity supply for vessels by the end of 2015. A sufficient number ofhydrogen refuelling points should be set up (no further than 300 km apart) to allow hydrogen vehicles to movethroughout the territory (by 2020 in Member States where this technology has already been introduced). The supplyof LNG should be available for navigation along the core Trans-European Transport (“TEN-T”) network in maritimeports (2020) and inland ports (2025), and LNG refuelling points should sustain heavy-vehicle road transport alongthe TEN-T core network (refuelling points at least every 400 km by 2020). By the end of 2020, Member Statesshould ensure that a sufficient number of natural gas (including bio-methane in gaseous form (“CNG”)) refuellingpoints are set up (at least every 150 km) to support CNG vehicles across the E.U. This Directive also requiresharmonisation of technical specifications for alternative fuels, and common standards for refuelling and electriccharging systems, and more information to consumers on the compatibility of fuels and vehicles.

The Directive requires Member States to develop national policy frameworks for the market development ofalternative fuels and their infrastructure. It also provides for the use of common technical specifications forrecharging and refuelling stations. Member States had to transpose the Directive into their national law and to submittheir national policy frameworks by 18 November 2016.

In Lithuania, the Directive has not been transposed into national law yet. However, the transposition procedures arein progress. On 1 February 2017, the Government adopted Resolution No. 87 “Regarding the Implementation ofDirective 2014/97/EU of the European Parliament and of the Council of 22 October 2014 on the Deployment ofAlternative Fuels Infrastructure”. This Resolution sets out the responsibilities of the ministries involved and actionsto be taken in order to ensure the proper transposition of the Directive.

Waste Management

Directive 31/1999 on the Landfill of Waste stipulates that Member States are obliged to reduce the amount ofbiodegradable municipal waste going to landfills to 35 per cent. of the total produced by 16 July 2016. In addition,the recently announced Circular Economy Strategy sets a binding landfill target to reduce landfill waste to amaximum of 10 per cent. of municipal waste by 2030. Scandinavian practice is even more ambitious than that –zero waste to landfill. In 2014, Lithuania landfilled 60 per cent. of municipal waste. The average landfilling rate inthe E.U. was only 27.5 per cent. in 2014.

The objective of Lithuania is to decrease landfilled biodegradable municipal waste to 35 per cent. in 2020 and to30 per cent. in 2023. In this context, Lithuania needs to develop and manage the necessary infrastructure for thepublic interests in order to attain the E.U. waste management goals and avoid possible liability of the State forfailure to achieve the predefined reduction targets. The Commission promotes energy recovery from proper wastemanagement and contribution to the E.U. strategy for smart, sustainable and inclusive growth. For the purpose ofenvironmental protection, waste management must be carried out in accordance with a number of waste preventionand management priorities.

Waste Hierarchy Principle

The Law of the Republic of Lithuania on Waste Management provides the basic terms and definitions related towaste management, such as the definitions of waste, recycling and recovery. It explains when waste ceases to bewaste and becomes a secondary raw material (the so-called end-of-waste criteria), and how to distinguish betweenwaste and by-products.

Making the avoidance and reduction of waste generation a high priority encourages the community, industry, andgovernment to reduce the number of virgin materials extracted and used. The goal is to maximise efficiency andavoid unnecessary consumption through behaviours such as: selecting items with the least packaging or that requirethe fewest resources to produce, avoiding disposable goods or single-use materials, buying products that are recycled,recyclable, repairable, refillable, reusable or biodegradable and using leftover food rather than throwing it away.

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The second priority according to the waste hierarchy principle is resource recovery, which maximises the optionsfor re-use, recycling, reprocessing and energy recovery. Where avoiding and reducing waste is not possible, thenext most preferred option is to re-use the materials without further processing, avoiding the costs of energy andother resources required for recycling. Re-use (without further processing) and recycling (processing waste materialsto make the same or different products) keeps materials in the productive economy and benefits the environment bydecreasing the need for new materials and waste absorption. Where further recycling is not feasible, it may bepossible to recover energy from the material and feed that back into the economy where this is acceptable to thecommunity. According to the waste management hierarchy, landfilling is the least preferable option and should belimited to the necessary minimum.

Requirements and Limitations for Waste-fired Power Plants

On 31 January 2014, the Law on Waste Management was amended and supplemented with provisions stating thatonly objects of national significance may use or plan to use municipal waste (which remains after the sorting ofwaste containing energy value and which is unsuitable for processing) for power generation purposes. The law alsospecifies the competence and discretion of the Government to set the criteria for acknowledging waste managementfacilities to be projects of national significance.

The requirement regarding the ownership of shares in waste management facilities of national significance wasestablished by the Government Resolution of 19 February 2014 amending the Provisions of Establishment andAcknowledgement of Waste Managing Objects of National Significance. New cumulative criteria were establishedby the Resolution for newly developed waste management facilities to be acknowledged as projects of nationalsignificance:

• the facility manages or is intended to manage the municipal waste of more than one municipal wastemanagement region;

• at least 51 per cent. of shares or voting rights attached to the shares of the company(-ies) intending to establishsuch a facility are held by the State or a State-owned company;

• the facility uses or intends to use municipal waste (which remains after the sorting of waste containing energyvalue and which unsuitable for processing) for combined power and heat generation (cogeneration));

• the facility is implementing the goals and objectives set out in the National Energy Independence Strategyapproved by Resolution No. XI-2133 of the Parliament of the Republic of Lithuania, and these measures areconsidered to be implementing the National Heat Sector Development Programme; and

• the facility complies with the provisions of the National Waste Management Plan related to the use of municipalwaste (which remains after the sorting of waste containing energy value and which is unsuitable for processing)as fuel for energy production.

In May 2014, the Government acknowledged that Vilnius and Kaunas CHP waste incineration projects developedby Group companies have national economic significance to the Republic of Lithuania.

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TAXATION

The following is a general description, inter alia, of certain tax considerations relating to the Notes. It does notpurport to be a complete analysis of all tax considerations relating to the Notes, whether in those countries orelsewhere. Prospective purchasers of Notes should consult their own tax advisers as to which countries’ tax lawscould be relevant to acquiring, holding and disposing of Notes and receiving payments of interest, principal and/orother amounts under the Notes and the consequences of such actions under the tax laws of those countries. Thissummary is based upon the law as in effect on the date of this Base Prospectus and is subject to any change in lawthat may take effect after such date.

The Republic of Lithuania Taxation

The following is a summary of certain Lithuanian tax consequences of ownership and disposition of Notes to aresident individual or a non-resident individual acting through a fixed base in Lithuania or a resident entity or anon-resident entity acting through a permanent establishment in Lithuania (the “Lithuanian Holder”) or a non-resident individual who is not acting through a fixed base in Lithuania or non-resident entity which is not actingthrough a permanent establishment in Lithuania that holds such Notes (the “Non-Lithuanian Holder”).

As used in the preceding sentence, a “resident individual” means an individual whose permanent place of residenceis in Lithuania, or whose personal, social or economic interests are located in Lithuania or who is present in Lithuaniafor more than 183 days in the relevant tax period or more than 280 days in two consecutive tax periods, and a“resident entity” means an entity which is legally established in Lithuania, and a “non-resident individual” meansan individual whose permanent place of residence is outside Lithuania, whose personal, social or economic interestsare located outside Lithuania and who is present in Lithuania for less than 183 days in the relevant tax period andless than 280 days in two consecutive tax periods, and a “non-resident entity” means an entity which is not legallyestablished in Lithuania. Taxation of interest income and capital gains received by non-resident entities actingthrough a permanent establishment in Lithuania is the same as that of resident entities defined above, therefore, itis not separately outlined in the further sections of this Base Prospectus. For relevant details on the taxation ofLithuanian permanent establishments as Noteholders, please refer to the taxation of resident entities

Taxation of Payments

Payments in respect of interest on the Notes (which also includes as interest, if applicable, the difference betweenthe redemption price and the issue price of the Notes) to a resident individual will be subject to 15 per cent. personalincome tax. The total amount of interest (including interest on the Notes) received during the calendar year notexceeding EUR 500 will not be subject to personal income tax.

Payments in respect of interest on the Notes to a resident entity will be included into calculation of its taxable profit.Taxable profit will be subject to 15 per cent. corporate income tax.

Payments in respect of interest on the Notes to a non-resident individual will be subject to 15 per cent. withholdingtax in Lithuania.

Payments in respect of interest on the Notes to a non-resident entity which is registered or otherwise organised in astate of the European Economic Area or in a state with which the Republic of Lithuania has concluded and broughtinto effect double tax treaty, will not be subject to withholding tax in Lithuania. Payments in respect of interest onthe Notes to a non-resident entity other than listed above will be subject to 10 per cent. withholding tax. Unless theHolder of a Note is identified and is eligible for exemption from withholding tax, payments of interest in respect ofthe Notes (which also includes as interest, if applicable, the difference between the redemption price and the issueprice of the Notes) will be subject to 15 per cent. withholding tax to be withheld and paid to the budget of theRepublic of Lithuania by the Issuer.

Taxation on Disposition of Notes

Capital gains (i.e. the difference between the sale price and acquisition costs) on disposal of the Notes received bya resident individual will be subject to 15 per cent. personal income tax. Any capital gains received from the sale ofsecurities (including the Notes) during the calendar year not exceeding EUR 500 will not be subject to personalincome tax. The tax relief will not apply if the sale proceeds are received from entities established in a tax haven orfrom individuals whose permanent place of residence is in a tax haven.

Capital gains (i.e. the difference between the sale price and acquisition costs) on disposal of the Notes received bya resident entity will be included into calculation of its taxable profit. Taxable profit will be subject to 15 per cent.corporate income tax.

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The disposition of Notes by the Non-Lithuanian Holder will not be subject to any Lithuanian income or capitalgains tax.

Registration and Stamp Duty

Transfers of Notes will not be subject to any registration or stamp duty in Lithuania. Prospective purchasers ofNotes are advised to consult their own tax advisers concerning the overall Lithuanian tax consequences of theownership of Notes.

Luxembourg Taxation

The following information is of a general nature only and is based on the laws presently in force in Luxembourg,though it is not intended to be, nor should it be construed to be, legal or tax advice. The information containedwithin this section is limited to Luxembourg withholding tax issues and prospective investors in the Notes shouldtherefore consult their own professional advisors as to the effects of state, local or foreign laws, includingLuxembourg tax law, to which they may be subject. Please be aware that the residence concept used under therespective headings below applies for Luxembourg income tax assessment purposes only. Any reference in thepresent section to a withholding tax or a tax of a similar nature, or to any other concepts, refers to Luxembourg taxlaw and/or concepts only.

Withholding Tax, Income Tax

Taxation of interest

There is no withholding tax for Luxembourg residents and non-residents on payments of interest in respect of theNotes, nor is any Luxembourg withholding tax payable on payments received upon repayment of the principal orupon an exchange of Notes except that in certain circumstances a withholding tax may be required to be paid oninterest pursuant to the law of 23 December 2005, as amended (the “Relibi Law”).

Under the Relibi Law, a withholding tax of 20 per cent. applies on savings income in the form of interest paid orsecured by a Luxembourg paying agent to the benefit of beneficial owners, who are individuals, resident inLuxembourg. For an individual Holder of the Notes who is a resident of Luxembourg and who acts in the course ofthe management of his/her private wealth, the 20 per cent. withholding tax is a final levy.

Furthermore, a Luxembourg resident individual who acts in the course of the management is his/her private wealthand who is the beneficial owner of an interest payment made by a paying agent established outside Luxembourg inan EU Member State or in a member of the European Economic Area may also, in accordance with the Relibi Law,opt for a final 20 per cent. levy (the “20 per cent. Levy”). In such case, the 20 per cent. Levy is calculated on thesame amounts as for the payments made by Luxembourg resident paying agents.

A Holder of Notes is subject to Luxembourg income tax in respect of the interest paid or accrued on the Notes onlyif such Holder (i) is or is deemed to be a resident of Luxembourg for tax purposes and the interest falls within thescope of the 20 per cent. Levy but the holder has not opted for the application of the 20 per cent. Levy, (ii) is or isdeemed to be a resident of Luxembourg for tax purposes and the interest has not been received by him/her in thecourse of the management of his/her private wealth, or (iii) such income is attributable to an enterprise or partthereof, which is carried on through a fixed place of business, a permanent establishment or a permanentrepresentative in Luxembourg.

Responsibility for the withholding of tax in application of the Relibi Law is assumed by the Luxembourg payingagent (within the meaning of the Relibi Law).

The Proposed Financial Transactions Tax (“FTT”)

On 14 February 2013, the European Commission published a proposal (the “Commission’s proposal”) for aDirective for a common FTT in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Sloveniaand Slovakia (the “participating Member States”). However, Estonia has since stated that it will not participate.

The Commission’s proposal has very broad scope and could, if introduced, apply to certain dealings in Notes(including secondary’ market transactions) in certain circumstances. The issuance and subscription of Notes should,however, be exempt.

Under the Commission’s proposal, FTT could apply in certain circumstances to persons both within and outside ofthe participating Member States. Generally, it would apply to certain dealings in Notes where at least one party isa financial institution, and at least one party is established in a participating Member State. A financial institutionmay be, or be deemed to be, “established” in a participating Member State in a broad range of circumstances,

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including (a) by transacting with a person established in a participating Member State or (b) where the financialinstrument which is subject to the dealings is issued in a participating Member State.

However, the FTT proposal remains subject to negotiation between participating Member States. It may thereforebe altered prior to any implementation, the timing of which, remains unclear. Additional E.U. Member States maydecide to participate.

Prospective holders of Notes are advised to seek their own professional advice in relation to the FTT.

FATCA

Pursuant to certain provisions of the U.S. Internal Revenue Code of 1986, commonly known as FATCA, a “foreignfinancial institution” may be required to withhold on certain payments it makes (“foreign passthru payments”)to persons that fail to meet certain certification, reporting, or related requirements. The Issuer is a foreign financialinstitution for these purposes. A number of jurisdictions (including the Republic of Lithuania) have entered into, orhave agreed in substance to, intergovernmental agreements with the United States to implement FATCA (“IGAs”),which modify the way in which FATCA applies in their jurisdictions. Under the provisions of IGAs as currently ineffect, a foreign financial institution in an IGA jurisdiction would generally not be required to withhold under FATCAor an IGA from payments that it makes. Certain aspects of the application of the FATCA provisions and IGAs toinstruments such as the Notes, including whether withholding would ever be required pursuant to FATCA or anIGA with respect to payments on instruments such as the Notes, are uncertain and may be subject to change. Evenif withholding would be required pursuant to FATCA or an IGA with respect to payments on instruments such asthe Notes, such withholding would not apply prior to 1 January 2019 and Notes issued on or prior to the date thatis six months after the date on which final regulations defining “foreign passthru payments” are filed with the U.S.Federal Register generally would be “grandfathered” for purposes of FATCA withholding unless materially modifiedafter such date. However, if additional notes that are not distinguishable from previously issued Notes are issuedafter the expiration of the grandfathering period and are subject to withholding under FATCA, then withholdingagents may treat all Notes, including the Notes offered prior to the expiration of the grandfathering period, as subjectto withholding under FATCA. Holders should consult their own tax advisors regarding how these rules may applyto their investment in the Notes. In the event any withholding would be required pursuant to FATCA or an IGA withrespect to payments on the Notes, no person will be required to pay additional amounts as a result of the withholding.

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SUBSCRIPTION AND SALE

Notes may be sold from time to time by the Issuer to any one or more of BNP Paribas and AB SEB Bankas (the“Dealers”). The arrangements under which Notes may from time to time be agreed to be sold by the Issuer to, andsubscribed by, Dealers are set out in a Dealer Agreement dated 27 June 2017 (the “Dealer Agreement”) and madebetween the Issuer and the Dealers. If in the case of any Tranche of Notes the method of distribution is an agreementbetween the Issuer and a single Dealer for that Tranche to be issued by the Issuer and subscribed by that Dealer, themethod of distribution will be described in the relevant Final Terms as “Non-Syndicated” and the name of thatDealer and any other interest of that Dealer which is material to the issue of that Tranche beyond the fact of theappointment of that Dealer will be set out in the relevant Final Terms. If in the case of any Tranche of Notes themethod of distribution is an agreement between the Issuer and more than one Dealer for that Tranche to be issuedby the Issuer and subscribed by those Dealers, the method of distribution will be described in the relevant FinalTerms as “Syndicated”, the obligations of those Dealers to subscribe the relevant Notes will be joint and severaland the names and addresses of those Dealers and any other interests of any of those Dealers which is material tothe issue of that Tranche beyond the fact of the appointment of those Dealers (including whether any of those Dealershas also been appointed to act as Stabilising Manager in relation to that Tranche) will be set out in the relevant FinalTerms.

Any such agreement will, inter alia, make provision for the form and terms and conditions of the relevant Notes,the price at which such Notes will be subscribed by the Dealer(s) and the commissions or other agreed deductibles(if any) payable or allowable by the Issuer in respect of such subscription. The Dealer Agreement makes provisionfor the resignation or termination of appointment of existing Dealers and for the appointment of additional or otherDealers either generally in respect of the Programme or in relation to a particular Tranche of Notes.

United States of America:

Regulation S Category 1; TEFRA D or TEFRA C as specified in the relevant Final Terms or neither if TEFRA isspecified as not applicable in the relevant Final Terms.

The Notes have not been, and will not be, registered under the Securities Act or with any securities regulatoryauthority of any state or other jurisdiction of the United States, and Bearer Notes are subject to U.S. tax lawrequirements. The Notes may not be offered, sold or (in the case of Bearer Notes) delivered within the United Statesor to, or for the account or benefit of, U.S. persons (as defined in Regulation S) except in certain transactions exemptfrom the registration requirements of the Securities Act. Each of the Dealers has agreed that, except as permitted bythe Dealer Agreement, it will not offer, sell or, in the case of Bearer Notes, deliver the Notes within the UnitedStates or to U.S. persons.

In addition, until 40 days after the commencement of any offering, an offer or sale of Notes within the United Statesby any Dealer (whether or not participating in the offering) may violate the registration requirements of the SecuritiesAct.

United Kingdom

Each Dealer has represented, warranted and agreed, and each future Dealer appointed under the Programme will berequired to represent, warrant and agree, that:

(a) No deposit-taking: in relation to any Notes having a maturity of less than one year:

(i) it is a person whose ordinary activities involve it in acquiring, holding, managing or disposing of investments(as principal or agent) for the purposes of its business; and:

(ii) it has not offered or sold and will not offer or sell any Notes other than to persons:

(A) whose ordinary activities involve them in acquiring, holding, managing or disposing of investments(as principal or agent) for the purposes of their businesses; or

(B) who it is reasonable to expect will acquire, hold, manage or dispose of investments (as principal oragent) for the purposes of their businesses,

where the issue of the Notes would otherwise constitute a contravention of Section 19 of the FSMA by theIssuer;

(b) Financial promotion: it has only communicated or caused to be communicated and will only communicate orcause to be communicated any invitation or inducement to engage in investment activity (within the meaningof section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances inwhich section 21(1) of the FSMA does not apply to the Issuer; and

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(c) General compliance: it has complied and will comply with all applicable provisions of the FSMA with respectto anything done by it in relation to any Notes in, from or otherwise involving the United Kingdom.

Prohibition of Sales to EEA Retail Investors

From 1 January 2018, unless the Final Terms in respect of any Notes specifies “Prohibition of Sales to EEA RetailInvestors” as “Not Applicable”, each Dealer has represented and agreed, and each further Dealer appointed underthe Programme will be required to represent and agree, that it has not offered, sold or otherwise made available andwill not offer, sell or otherwise make available any Notes which are the subject of the offering contemplated by theBase Prospectus as completed by the Final Terms in relation thereto to any retail investor in the European EconomicArea. For the purposes of this provision:

(a) the expression retail investor means a person who is one or more of the following:

(i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”);or

(ii) a customer within the meaning of Directive 2002/92/EC (as amended, the “Insurance MediationDirective”), where that customer would not qualify as a professional client as defined in point (10) ofArticle 4(1) of MiFID II; and

(b) the expression an “offer” includes the communication in any form and by any means of sufficient informationon the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribethe Notes.

Republic of Lithuania

Each Dealer has represented, warranted and agreed not to offer or sell any Notes in the Republic of Lithuania otherthan in compliance with the Law on Securities of the Republic of Lithuania and any other laws applicable in theRepublic of Lithuania governing the issue, offering and sale of Notes.

Japan

The Notes have not been and will not be registered under the Financial Instruments and Exchange Act of Japan(Act No. 25 of 1948, as amended, (the “FIEA”)). Accordingly, each of the Dealers has represented and agreed, andeach further Dealer appointed under the Programme will be required to represent and agree, that it has not, directlyor indirectly, offered or sold and will not, directly or indirectly, offer or sell any Notes in Japan or to, or for thebenefit of, a resident of Japan (which term as used herein means any person resident in Japan, including anycorporation or other entity organised under the laws of Japan), or to others for re-offering or resale, directly orindirectly, in Japan or to, or for the benefit of, any resident in Japan, except pursuant to an exemption from theregistration requirements of, and otherwise in compliance with, the FIEA and other relevant laws and regulationsof Japan.

General

Each Dealer has represented, warranted and agreed, and each future Dealer appointed under the Programme will berequired to represent, warrant and agree that, it has complied and will comply with all applicable laws and regulationsin each country or jurisdiction in or from which it purchases, offers, sells or delivers Notes or possesses, distributesor publishes this Base Prospectus or any Final Terms or any related offering material, in all cases at its own expense.Other persons into whose hands this Base Prospectus or any Final Terms comes are required by the Issuer and theDealers to comply with all applicable laws and regulations in each country or jurisdiction in or from which theypurchase, offer, sell or deliver Notes or possess, distribute or publish this Base Prospectus or any Final Terms orany related offering material, in all cases at their own expense.

The Dealer Agreement provides that the Dealers shall not be bound by any of the restrictions relating to any specificjurisdiction (set out above) to the extent that such restrictions shall, as a result of change(s) or change(s) in officialinterpretation, after the date hereof, of applicable laws and regulations, no longer be applicable but without prejudiceto the obligations of the Dealers described in the paragraph headed “General” above.

Selling restrictions may be supplemented or modified with the agreement of the Issuer. Any such supplement ormodification may be set out in the relevant Final Terms (in the case of a supplement or modification relevant onlyto a particular Tranche of Notes) or in a supplement to this Base Prospectus.

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GLOSSARY

Cross-border interconnection point Refers to the location in the transmission system, on the border betweentwo countries or territories, where natural gas is transferred from thetransmission system of one country or territory to the transmission systemof another country or territory.

Customers of independent suppliers Electricity distribution to corporate customers.

EA Emission allowances.

NCC National Control Commission for Prices and Energy.

Public and guaranteed supply Electricity distribution to household customers.

Regulation power Increasing or decreasing levels of electricity generation in accordancewith TSO instructions when there is a deficit or surplus in the electricitysystem, respectively.

ROCE Return on capital employed, which is equal to operating profit/(averageamount of equity during the reporting period + average amount ofborrowings during the reporting period).

ROE Return on equity, which is equal to net comparable profit (loss) of arespective reporting period restated at annual value/average amount ofequity during the reporting period.

SAIDI Average duration of unplanned interruptions in electricity or gastransmission.

SAIFI Average number of unplanned long interruptions per customer.

State Aid Any intervention by a State or through State resources which (1) givesthe recipient an advantage on a selective basis (2) will or may distortcompetition and (3) is likely to affect trade between E.U. Member States.

Virtual trading point Refers to the location in the transmission system where transfer of titleto natural gas occurs (without the obligation to transfer natural gas to aphysical location).

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GENERAL INFORMATION

Authorisation

1. The establishment of the Programme was authorised by resolutions of the Board of Directors of the Issuerpassed on 15 June 2017 and 20 June 2017. The Issuer has obtained or will obtain from time to time all necessaryconsents, approvals and authorisations in connection with the issue and performance of the Notes.

Legal and Arbitration Proceedings

2. Save as disclosed in “Description of the Group—Legal Proceedings” set out on pages 98 to 99 herein, there areno governmental, legal or arbitration proceedings, (including any such proceedings which are pending orthreatened, of which the Issuer is aware), which may have, or have had during the 12 months prior to the dateof this Base Prospectus, a significant effect on the financial position or profitability of the Issuer and itsSubsidiaries (together, the “Group”).

Significant/Material Change

3. Since 31 December 2016 there has been no material adverse change in the prospects of the Issuer or the Group.Since 31 March 2017 there has there been no significant change in the financial or trading position of the Issueror the Group.

Auditors

4. UAB PricewaterhouseCoopers, which is registered on the list of authorised Lithuanian audit companies,administered by the Lithuanian Chamber of Auditors, under certificate No. 001273 with its registered office inVilnius (J.Jasinskio 16B, LT—03163 Vilnius), audited the 2016 Financial Statements and issued an unqualifiedauditors’ report on the aforementioned financial statements.

In addition, PwC audited the 2015 Financial Statements and issued a qualified auditor’s report on theaforementioned financial statements. See “Presentation of Financial Information of the Group—Qualificationto 2015 Financial Statements”.

UAB PricewaterhouseCoopers, independent auditors, holds audit company licence No. 001273. On behalf ofPwC, the auditors’ report on the 2016 Financial Statements was signed by Vytenis Lazauskas, holding auditor’scertificate No. No.000536.

On behalf of PwC, the auditors’ report on the 2015 Financial Statements was signed by Rimvydas Jogėla,holding auditor’s certificate No. No.000457.

Documents on Display

5. Copies of the following documents (together with English translations thereof) may be inspected during normalbusiness hours at the offices of the Issuer at Žvejų g. 14, LT-09310, Vilnius, Lithuania for 12 months from thedate of this Base Prospectus:

(a) the constitutive documents of the Issuer;

(b) the most recently published consolidated audited annual financial statements of the Issuer and the mostrecently published interim financial statements (if any) of the Issuer (with a direct and accurate Englishtranslation thereof), in each case together with any audit or review reports prepared in connection therewith;

(c) the Agency Agreement;

(d) the Deed of Covenant;

(e) the Programme Manual (which contains the forms of the Notes in global and definitive form); and

(f) the Issuer-ICSDs Agreement (which is entered into between the Issuer and Euroclear and/or Clearstream,Luxembourg with respect to the settlement in Euroclear and/or Clearstream, Luxembourg of Notes in NewGlobal Note or NSS form).

Clearing of the Notes

6. The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The appropriatecommon code and the International Securities Identification Number in relation to the Notes of each Tranche

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will be specified in the relevant Final Terms. The relevant Final Terms shall specify any other clearing systemas shall have accepted the relevant Notes for clearance together with any further appropriate information.

The address of Euroclear is Euroclear Bank SA/NV, 1 Boulevard du Roi Albert II, B-1210 Brussels and theaddress of Clearstream, Luxembourg is Clearstream Banking, 42 Avenue JF Kennedy, L-1855 Luxembourg.

Issue Price and Yield

7. Notes may be issued at any price. The issue price of each Tranche of Notes to be issued under the Programmewill be determined by the Issuer and the relevant Dealer(s) at the time of issue in accordance with prevailingmarket conditions and the issue price of the relevant Notes or the method of determining the price and theprocess for its disclosure will be set out in the applicable Final Terms. In the case of different Tranches of aSeries of Notes, the issue price may include accrued interest in respect of the period from the interestcommencement date of the relevant Tranche (which may be the issue date of the first Tranche of the Series or,if interest payment dates have already passed, the most recent interest payment date in respect of the Series) tothe issue date of the relevant Tranche.

The yield of each Tranche of Notes set out in the applicable Final Terms will be calculated as of the relevantissue date on an annual or semi-annual basis using the relevant issue price. It is not an indication of future yield.

Passporting

8. In addition to the applications already described in this Base Prospectus, the Issuer may, on or after the date ofthis Base Prospectus, make applications for one or more further certificates of approval under Article 18 of theProspectus Directive as implemented in Luxembourg to be issued by the CSSF to the competent authority inany Member State.

Dealers transacting with the Issuer

9. Certain of the Dealers and their affiliates have engaged, and may in the future engage, in investment bankingand/or commercial banking transactions with, and may perform other services for, the Issuer and its affiliatesin the ordinary course of business. In addition, in the ordinary course of their business activities, the Dealersand their affiliates may make or hold a broad array of investments and actively trade debt and equity securities(or related derivative securities) and financial instruments (including bank loans) for their own account and forthe accounts of their customers. Such investments and securities activities may involve securities and/orinstruments of the Issuer or Issuer’s affiliates. Certain of the Dealers or their respective affiliates that have alending relationship with the Issuer routinely hedge their credit exposure to the Issuer consistent with theircustomary risk management policies. Typically, such Dealers and their respective affiliates would hedge suchexposure by entering into transactions which consist of either the purchase of credit default swaps or the creationof short positions in securities, including potentially the Notes issued under the Programme. Any such shortpositions could adversely affect future trading prices of Notes issued under the Programme. The Dealers andtheir respective affiliates may also make investment recommendations and/or publish or express independentresearch views in respect of such securities or financial instruments and may hold, or recommend to clients thatthey acquire, long and/or short positions in such securities and instruments.

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F-1

INDEX TO CONSOLIDATED FINANCIAL INFORMATION

Unaudited Condensed Consolidated Interim Financial Statements of the Issuer as at and for the three monthperiod ended 31 March 2017

Consolidated Interim Statement of Financial Position F-4Consolidated Interim Statement of Comprehensive Income F-5Consolidated Interim Statement of Changes in Equity F-6Consolidated Interim Statement of Cash Flows F-8Notes to the Consolidated Interim Financial Statements F-9

Audited Financial Statements of the Issuer as at and for the year ended 31 December 2016

Independent Auditors’ Report F-17Consolidated Statement of Financial Position F-22Consolidated Statement of Profit or Loss and Other Comprehensive Income F-24Consolidated Statement of Changes in Equity F-25Consolidated Statement of Cash Flows F-27Notes to the Consolidated Financial Statements F-28

Audited Financial Statements of the Issuer as at and for the year ended 31 December 2015

Auditors’ Report F-86Consolidated Statement of Financial Position F-90Consolidated Statement of Profit or Loss and Other Comprehensive Income F-92Consolidated Statement of Cash Flows F-93Consolidated Statement of Changes in Equity F-94Notes to the Consolidated Financial Statements F-96

245496 Olive pp138-imp 27/06/2017 09:22 Page 1

2017 LIETUVOS ENERGIJA UAB CONSOLIDATED AND COMPANY‘S CONDENSED INTERIM FINANCIAL INFORMATION

COMPANY’S CONDENSED INTERIM FINANCIAL INFORMATION FOR THE THREE MONTH PERIOD ENDED 31 MARCH 2017, PREPARED ACCORDING TO INTERNATIONAL ACCOUNTING STANDARD 34, 'INTERIM FINANCIAL REPORTING' AS ADOPTED BY THE EUROPEAN UNION (UNAUDITED)

Group of energy companies www.le.lt

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2 Group of energy companies www.le.lt

Translation note: These condensed interim financial statements are a translation from the original, which was prepared in Lithuanian. All possible care has been taken to ensure that the translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of this document takes precedence over this translation. Condensed interim financial information was approved by Chief Executive Officer, Finance and Treasury Director and Head of Accounting Service Center of Verslo Aptarnavimo Centras UAB (acting under Order No IS17-20 of 22 February 2017) at 15 May 2017:

CONTENTS CONDENSED INTERIM FINANCIAL INFORMATION

Condensed interim statements of financial position 3

Condensed interim statements of comprehensive income 4

Condensed interim statements if changes in equity 5 – 6

Condensed interim statements of cash flows 7

Notes to the condensed interim financial information 8 – 15

Dalius Misiūnas

Chief Executive Officer Darius Kašauskas

Finance and Treasury Director Giedruolė Guobienė

Head of Accounting Service Center of Verslo Aptarnavimo Centras UAB acting under Order No IS17-20 of 22

February 2017

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F-3

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Lietuvos energija, UAB, Company code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania CONDENSED INTERIM STATEMENTS OF FINANCIAL POSITION At 31 March 2017 All amounts in thousands of euro unless otherwise stated

3 Group of energy companies www.le.lt

Notes Group Company

2017.03.31 2016.12.31 2017.03.31 2016.12.31 ASSETS Non-current assets

Intangible assets 3 28,060 32,261 - - Property, plant and equipment 3 1,771,384 1,770,814 352 348 Investment property 45,007 46,207 - - Investments in subsidiaries 4 - - 1,177,229 1,172,187 Amounts receivable after one year 210,334 203,582 208,986 196,511 Other non-current assets 1,871 2,620 - - Deferred income tax asset 5,053 5,699 111 93

Total non-current assets 2,061,709 2,061,183 1,386,678 1,369,139

Current assets Inventories 37,873 38,117 - - Prepayments 21,753 6,967 1,082 5,011 Trade receivables 105,341 111,884 - - Other amounts receivable 20,961 29,363 63,436 14,294 Other current assets 4,384 4,606 - - Prepaid income tax 1,083 589 241 160 Short-term investments - - 3,768 4,902 Cash and cash equivalents 157,745 178,565 91 73

349,140 370,091 68,618 24,440

Non-current assets held for sale 1,045 878 4,906 4,782 Total current assets 350,185 370,969 73,524 29,222

TOTAL ASSETS 2,411,894 2,432,152 1,460,202 1,398,361

EQUITY AND LIABILITIES Equity

Share capital 5 1,212,156 1,212,156 1,212,156 1,212,156 Reserves 92,875 92,171 9,758 9,758 Retained earnings (deficit) (16,258) (35,952) 136,616 75,699

Equity attributable to owners of the parent 1,288,773 1,268,375 1,358,530 1,297,613

Non-controlling interests 49,783 51,172 - - Total equity 1,338,556 1,319,547 1,358,530 1,297,613

Liabilities Non-current liabilities

Non-current borrowings 6 345,902 364,957 22,908 23,440 Finance lease liabilities 282 316 - - Grants and subsidies 282,573 284,929 - - Deferred income tax liabilities 42,518 40,481 - - Provisions 7 3,199 3,254 - - Deferred income 52,307 52,214 - - Other non-current amounts payable and liabilities 12,542 11,780 9,525 9,358

Total non-current liabilities 739,323 757,931 32,433 32,798

Current liabilities Current portion of long-term debts 6 84,843 90,008 2,131 2,131 Current borrowings 6 57,098 38,953 66,024 64,759 Current portion of finance lease liabilities 154 157 - - Trade payables 60,146 96,118 128 343 Advance amounts received 27,060 27,636 - - Income tax liabilities 12,957 9,355 - - Provisions 7 7,331 12,883 - - Other current amounts payable and liabilities 84,426 79,564 956 717

Total current liabilities 334,015 354,674 69,239 67,950

Total liabilities 1,073,338 1,112,605 101,672 100,748

TOTAL EQUITY AND LIABILITIES 2,411,894 2,432,152 1,460,202 1,398,361

The accompanying notes form an integral part of this condensed interim financial information.

F-4

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Lietuvos energija, UAB, Company code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania CONDENSED INTERIM STATEMENTS OF COMPREHENSIVE INCOME For the three-month period ended 31 March 2017 All amounts in thousands of euro unless otherwise stated

4 Group of energy companies www.le.lt

Group Company

Notes 2017 m. 2016 m. 2017 m. 2016 m.

I Q I Q I Q I Q

Revenue

Sales revenue 302,825 328,052 631 821 Other income 6,795 7,047 - - Dividend revenue - - 61,455 30,311

Total revenue 309,620 335,099 62,086 31,132

Operating expenses

Purchases of electricity, gas for trading and related services (129,082) (130,852) - - Purchases of gas and heavy fuel oil (96,615) (95,430) - - Depreciation and amortisation (20,338) (18,871) - (1) Wages and salaries and related expenses (20,185) (22,216) (983) (743) Repair and maintenance expenses (3,880) (4,556) - - Revaluation of property, plant and equipment (1,086) - - - Other expenses 8 (9,432) (14,392) (360) (345)

Total operating expenses (280,618) (286,317) (1,343) (1,089)

Operating profit (loss) 29,002 48,782 60,743 30,043

Finance income 623 938 506 1,455 Finance costs (1,425) (1,975) (365) (262)

Profit (loss) before tax 28,200 47,745 60,884 31,236

Current year income tax (expense)/income (3,500) (6,541) 14 (166) Deferred income tax (expense)/income (2,681) (5,924) 19 9

Net profit 22,019 35,280 60,917 31,079

Attributable to: Owners of the parent 20,398 32,026 60,917 31,079 Non-controlling interests 1,621 3,254 - -

Other comprehensive income (loss) Items that will not be reclassified to profit or loss

Gain (loss) on revaluation of non-current assets - - - - Items that will not be reclassified to profit or loss, total - - - -

Items that will be reclassified to profit or loss

Change in fair value of available-for-sale financial assets - (14) - (14) Items that will be reclassified to profit or loss, total - (14) - (14)

Other comprehensive income (loss) - (14) - (14)

Total comprehensive income for the period 22,019 35,266 60,917 31,065

Attributable to: Owners of the parent 20,398 32,012 60,917 31,065 Non-controlling interests 1,621 3,254 - - The accompanying notes form an integral part of this condensed interim financial information.

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F-7

245496 Olive pp138-imp 27/06/2017 09:22 Page 7

Lietuvos energija, UAB, Company code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania CONDENSED INTERIM STATEMENTS OF CASH FLOWS For the three-month period ended 31 March 2017 All amounts in thousands of euro unless otherwise stated

7 Group of energy companies www.le.lt

The accompanying notes form an integral part of this condensed interim financial information.

Notes

Group Company

2017 2016 2017 2016

I Q I Q I Q I Q

Cash flows from operating activities

Net profit for the period 22,019 35,280 60,917 31,079 Adjustments for non-monetary expenses (income):

Depreciation and amortisation expenses 3 23,462 21,846 - 1 Impairment of property, plant and equipment 1,086 - - - Revaluation of derivative financial instruments 1,492 - - - Share of profit of associates and joint ventures - 2 - - Impairment of financial assets (reversal of impairment) (1,585) 586 - - Income tax expenses 6,181 12,465 (33) 157 (Depreciation) of grants (3,124) (2,975) - - Increase (decrease) in provisions (5,607) (8,793) - - Inventory write-down to net realizable value/ (reversal) - (20) - - (Income) expenses on revaluation of emission allowances 3,417 4,744 - - (Gain) loss on disposal/write-off of property, plant and equipment

592 13 - -

Elimination of results of financing and investing activities:

Interest (income) (427) (805) (506) (1,456) Interest expenses 1,355 1,424 206 146 Other finance (income) expenses (126) 418 (61,296) (30,194)

Changes in working capital:

(Increase) decrease in trade receivables and other amounts receivable

11,125 (2,410) 65 (253)

(Increase) decrease in inventories, prepayments and other current assets

(14,116) 30,355 - (725)

Increase (decrease) in amounts payable, deferred income and advance amounts received

(18,886) (51,243) (551) 870

Income tax (paid) (491) (453) - - Net cash flows from (used in) operating activities 26,367 40,434 (1,198) (375)

Cash flows from investing activities

(Acquisition) of property, plant and equipment and intangible assets

(41,339) (24,219) (4) -

Disposal of property, plant and equipment and intangible assets

1,490 1,274 - -

Loans (granted) - - (4,000) (500) Loans repaid - 4,504 4,300 4,575 (Acquisition) disposal of subsidiaries - (33,158) (165) (34,985) Grants received - 8 - - Interest received 84 29 41 486

Net cash flows from (used in) investing activities (39,765) (51,562) 172 (30,424)

Cash flows from financing activities

Proceeds from borrowings 13,038 44,357 1,265 25,571 Repayments of borrowings (24,192) (17,701) - - Finance lease payments (37) (42) - - Interest paid (1,313) (1,611) (221) (176) Dividends paid - (124) - -

Net cash flows from (used in) financing activities (12,504) 24,879 1,044 25,395

Increase (decrease) in cash and cash equivalents (including overdraft)

(25,902) 13,751 18 (5,404)

Cash and cash equivalents (including overdraft) at the beginning of the period 178,565 122,810 73 13,179

Cash and cash equivalents (including overdraft) at the end of the period

152,663 136,561 91 7,775

F-8

245496 Olive pp138-imp 27/06/2017 09:22 Page 8

Lietuvos energija, UAB, Company code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION

For the three-month period ended 31 March 2017 All amounts in thousands of euro unless otherwise stated

8 Group of energy companies www.le.lt

1 Accounting principles

Condensed interim financial information of the Lietuvos Energija UAB (hereinafter - the Company) and consolidated condensed interim financial information of the Company and its subsidiaries (hereinafter – the Group) for a three-month period ended 31 March 2017 has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and applicable to interim financial reporting (International Accounting Standard (IAS) 34, 'Interim financial reporting'). This unaudited condensed interim financial information should be read together with the annual financial statements for the year ended 31 December 2016, which have been prepared in accordance with IFRS as adopted by the EU.

Financial year of Company and other Group companies coincides with the calendar year.

The accounting policies applied in the preparation of this condensed interim financial information are consistent with those of the annual financial statements for the year ended 31 December 2016.

Income tax

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual profit or loss.

New and amended standards, and interpretations

There are no new standards, amendments and interpretations that are mandatory for the Group and the Company with effect from 2017, and that would have a material impact on the Group’s and Company‘s financial information.

The Group and Company‘s management do not believe the newly published standards, amendments and interpretations that are mandatory for the Group’s and Company‘s reporting periods beginning on or after 1 January 2017 will have a material impact on the Group’s and Company‘s financial statements.

Accounting policies applied to significant transactions within the Group in relation to the Group‘s restructuring are described in Note 2.

2 Critical accounting estimates and judgements used in the preparation of financial statements

Accounting estimates and judgments are continuously reviewed and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The preparation of financial information according to International Financial Reporting Standards as adopted by the EU requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses, and disclosures of contingencies. Changes in the underlying assumptions, estimates and judgments may have a material effect on this financial information. The accounting estimates applied in preparing the condensed interim financial information are consistent with those used in preparing the annual financial statements for the year ended 31 December 2016.

3 Intangible assets and property, plant and equipment

Movement on Group’s account of intangible assets and property, plant and equipment is presented below:

Group Intangible assets Property, plant and equipment

Net book value at the beginning of the period 32,261 1,770,814

Acquisitions 245 25,908 Sales - (249) Write-offs/Emission allowances utilised (1) (703) Impairment/reversal of impairment - (1,086) Emission allowances grants received 110 - Revaluation of emission allowances (3,417) - Reclassification (to) finance lease - (609) Reclassification from other assets to property, plant and equipment/intangible assets 38 (38) Reclassification to assets held for sale - (369) Reclassification from investment property - (9) Reclassification from inventories - 11 Depreciation/amortisation (1,176) (22,286)

Net book value at the end of the period 28,060 1,771,384

Movement on Company’s account of intangible assets and property, plant and equipment is presented below:

Company Intangible assets Property, plant and equipment

Net book value at the beginning of the period - 348

Acquisition - 4 Net book value at the end of the period - 352

F-9

245496 Olive pp138-imp 27/06/2017 09:22 Page 9

Lietuvos energija, UAB, Company code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION

For the three-month period ended 31 March 2017 All amounts in thousands of euro unless otherwise stated

9 Group of energy companies www.le.lt

4 Investments in subsidiaries and other investments

Movement of the Company’s account of investments in subsidiaries during 1 quarter of 2017 is presented below:

Company Investments in subsidiaries

Net book value at the beginning of the period 1,172,187

Increase and payment of share capital 5,165 Reclassification to Non-current assets held for sale (123) Net book value at the end of the period 1,177,229

Changes in share capital and acquisition of subsidiaries Increase and reduction of share capital of the Group’s company’s, recoupment of operating losses, payments for increase of share capital during the period from 1 January to 31 March 2017 and balances of unpaid share capital as at 31 March 2017:

Subsidiary Issue date Amount of

shares, pcs* Nominal

price

Nominal value of issued shares,

EUR’000

Paid during 2017 IQ

Unpaid by 31 March 2017

Date of articles amend- ment

Increase and reduction of share capital UAB Vilniaus kogeneracinė jėgainė 19 December 2016 68,965,518 0,29 20,000 5,000 - 19 January 2017 UAB Energijos Sprendimų centras 29 August 2016 520,000 1,00 520 165 7 7 September 2016 Total 5,165 7

* there is stated amount of shares that belong to the Company At 19 December 2016 the Company paid EUR 5,000 thousand of UAB Vilniaus kogeneracinė jėgainė contribution in authorized capital. New Articles of Association of UAB Vilniaus kogeneracinė jėgainė, related to the increase of the authorized capital, are registered by state Register of Legal Entities at 19 January 2017, consequently, EUR 5,000 thousand, at 31 December 2016 accounted for as Prepayments, in 2017 were reclassified to the Company’s Investments in subsidiaries. Decision to sell VšĮ Energetikų mokymų centras At 2 February 2017 the shareholder of the Company has decided to start selling procedure VšĮ Energetikų mokymų centras., At 31 March 2017 investment in VšĮ Energetikų mokymų centras is accounted for as “Non-current assets held for sale” in the statement of financial position. Book value of the investment at 31 March 2017 amounts to 123 thousand EUR. The Company's assessment shows that carrying amount of the investment does not exceed the potential selling price, net of the sale costs. Decision to sell Duomenų logistikos centras, UAB In November 2016 the shareholder of the Company has decided to start selling procedure of Duomenų Logistikos Centras, UAB, decision is aimed on further Group concentration on the main activities. Disposal process is expected to be finished by the middle of 2017. At 31 December 2016 investment in Duomenų Logistikos Centras is accounted for as “Non-current assets held for sale” in the statement of financial position. Book value of the investment at 31 March 2017 amounts to 4,705 thousand EUR. The Company's assessment shows that carrying amount of the investment does not exceed the potential selling price, net of the sale costs.

F-10

245496 Olive pp138-imp 27/06/2017 09:22 Page 10

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F-11

245496 Olive pp138-imp 27/06/2017 09:22 Page 11

Lietuvos energija, UAB, Company code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION

For the three-month period ended 31 March 2017 All amounts in thousands of euro unless otherwise stated

11 Group of energy companies www.le.lt

5 Share capital

As at 31 March 2017 and 31 December 2016 the Company‘s share capital comprised EUR 1,212,156,294. As at 31 March 2017 and 31 December 2016 the Company‘s share capital was divided in to 4,179,849,289 ordinary shares with par value EUR 0,29 each.

As at 31 March 2017 and 31 December 2016 share capital was fully paid.

6 Borrowings

Group Company

2017.03.31 2016.12.31 2017.03.31 2016.12.31 Non-current Bank borrowings 345,902 364,957 22,908 23,440 Current Current portion of non-current borrowings 84,843 90,008 2,131 2,131 Current borrowings 52,014 38,948 43,038 38,948 Loans from related parties (cash pool) - - 22,986 25,811 Bank overdrafts 5,082 - - - Accrued interest 2 5 - - Total borrowings 487,843 493,918 91,063 90,330

All borrowings of the Group bear variable interest rates with repricing intervals of up to 6 months. 7 Provisions

Group Company

2017.03.31 2016.12.31 2017.03.31 2016.12.31 Non-current 3,199 3,254 - - Current 7,331 12,883 - - Carrying amount 10,530 16,137 - -

Group Emission allowance liabilities

Provisions for employee benefits

Provisions for onerous contracts Total

At 1 January 2017 1,316 4,529 10,292 16,137

Increase (decrease) during the period - - - - Utilised during the period 32 (795) (4,436) (5,199) Increase (decrease) due to change in assumptions (378) (30) - (408) At 31 March 2017 970 3,704 5,856 10,530

Provisions for onerous gas supply contracts at the end of 2016 amounted to EUR 10,292 thousand. Upon acquisition of natural gas supply operations, the Group company Lietuvos Dujų Tiekimas UAB assumed an obligation to transfer the discount, which was received retrospectively on natural gas import price during January 2013–April 2014, to the end users in future periods. As at 31 March 2017 the Group adjusted the adjusted provision in respect of onerous part of contracts for household and non-household users in amount of EUR 4,436 thousand by taking into account the prerequisites for the execution of the contracts at the financial reporting date. 8 Other expenses

Group Company 2017 2016 2017 2016

1 Q 1 Q 1 Q 1 Q

Revaluation and provisions of emission allowances 3,776 5,952 - - Taxes 1,747 1,716 6 8 Customer service 987 962 - - Motor vehicles 937 808 24 29 Telecommunication and IT services 872 742 58 45 Write-offs of property, plant and equipment 702 574 - - Utility services 648 666 14 19 Rent 331 546 32 45 Expenses of low-value inventory items 191 214 - - Personnel development 121 92 14 17 Consulting services 101 186 37 82 Business trips 88 97 7 13 Public relations and marketing 68 131 18 16 Impairment of inventories (reversal) (31) (20) - - Impairment/(Reversal) of impairment of receivables (1,585) 388 - - Business support services - - 66 39 Other expenses 479 1,338 84 32 9,432 14,392 360 345

F-12

245496 Olive pp138-imp 27/06/2017 09:22 Page 12

Lietuvos energija, UAB, Company code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION

For the three-month period ended 31 March 2017 All amounts in thousands of euro unless otherwise stated

12 Group of energy companies www.le.lt

9 Dividends

Group‘s companies declared dividends during the period from 1 January to 31 March 2017:

Announcement Date

Dividends declared by Dividends

distributed for the period

Dividends per share,

Eur

Amount of dividends declared

The Company‘s

dividend

revenue

Dividends allocated to the non –

controlling interest

24 March 2017 AB Energijos Skirstymo Operatorius July – December 2016 0.05786 51,763 49,166 2,597

24 March 2017 Lietuvos energijos gamyba, AB July – December 2016 0.02 12,702 12,289 413

64,465 61,455 3,010

Group‘s companies declared dividends during the period from 1 January to 31 March 2016:

Announcement Date

Dividends declared by Dividends

distributed for the

period

Dividends per share,

Eur

Amount of dividends

declared

The Company‘s dividend

revenue

Dividends allocated to the non –

controlling interest

29 March 2016 AB Energijos Skirstymo Operatorius July – December 2015 0.0342 30,596 29,061 1,535

30 March 2016 NT Valdos UAB 2015 year 0.4231 1,250 1,250 -

31,846 30,311 1,535

The Company did not announce distribution of dividends during first quarter of 2017 and 2016. 10 Transactions with related parties

As at 31 March 2017 and 31 December 2016 the parent company was the Republic of Lithuania represented by Ministry of Finance. For the purpose of disclosure of related parties, the Republic of Lithuania does not include central and local government authorities. The disclosures comprise transactions and their balances with the parent company, subsidiaries (Company‘s transactions), associates and all entities controlled by or under significant influence of the state (transactions with these entities are disclosed only if they are material), and management.

Group‘s transactions with related parties The Group’s transactions with related parties during the period from 1 January to 31 March 2017 and balances arising on these transactions as at 31 March 2017 are presented below:

Related party Amount payable Amounts

receivable Finance income Sales

Finance expenses

Purchases

2017.03.31 2017.03.31 2017 I Q 2017 I Q 2017 I Q 2017 I Q

EPSO-G, UAB - 202,307 378 3 - - Litgrid AB 11,576 5,487 - 12,783 41 28,895 BALTPOOL UAB 13,519 14,632 - 22,270 - 23,128 TETAS, UAB 2,837 382 9 369 - 2,945 LITGRID Power Link Service, UAB - 10 - 25 - - Amber Grid, AB 6,123 3,209 - 7,981 - 7,500 GET Baltic - 267 - 125 - 278 Group‘s associates and other related parties - 130 2 28 - 55 Total 34,055 226,424 389 43,584 41 62,801

The Group’s transactions with related parties during the period from 1 January to 31 March 2016 and balances arising on these transactions as at 31 December 2016 are presented below:

Related party Amounts payable

Amounts receivable

Finance income Sales Finance

expenses Purchases

2016.12.31 2016.12.31 2016 I Q 2016 I Q 2016 I Q 2016 I Q

EPSO-G UAB - 210,414 789 2 - - Litgrid AB 11,429 5,058 - 12,396 - 26,898 BALTPOOL UAB 14,945 3,941 - 16,346 - 27,789 TETAS UAB 4,132 337 - 291 - 2,004 LITGRID Power Link Service, UAB - 19 - 175 - - AB Amber Grid 5,669 3,430 - 28 - 9,715 GET Baltic 745 2,538 - - - - Group‘s associates and other related parties - 295 - 32 - 770 Total 36,920 226,032 789 29,095 - 67,176

F-13

245496 Olive pp138-imp 27/06/2017 09:22 Page 13

Lietuvos energija, UAB, Company code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION

For the three-month period ended 31 March 2017 All amounts in thousands of euro unless otherwise stated

13 Group of energy companies www.le.lt

10 Transactions with related parties (continued)

Company‘s transactions with related parties The Company’s transactions with related parties during the period from 1 January to 31 March 2017 and balances arising on these transactions as at 31 March 2017 are presented below:

Related parties Loans

payable Amounts payable

Loans receivable

Amounts receivable

Finance income

Sales Finance

expenses Purchases

2017.03.31 2017.03.31 2017.03.31 2017.03.31 2017 I Q 2017 I Q 2017 I Q 2017 I Q Subsidiaries AB Energijos Skirstymo Operatorius 229 5,334 - 49,366 49,166 251 (30) - Lietuvos energijos gamyba AB 12,921 3,891 - 13,414 12,289 92 (39) - UAB Lietuvos dujų tiekimas - - - 5 - 26 (4) - NT Valdos, UAB 4,650 39 - 24 - 33 (7) (89) UAB Energetikos paslaugų ir rangos organizacija - - 625 6,341 14 27 - - UAB Verslo aptarnavimo centras - 30 - 22 - 29 - (72) Energijos tiekimas UAB - - - 18 2 36 - - UAB LITGAS 2,676 1 - 15 - 28 (1) - UAB Technologijų ir inovacijų centras - 26 - 8 - 19 - (56) UAB VAE SPB - - - 1 - 1 - - VšĮ Energetikų mokymų centras - - - 1 - 4 - - Tuuleenergia OU - - 4,927 57 81 - - - UAB Duomenų logistikos centras - 55 - 2 - 6 - - UAB EURAKRAS 1,172 1 - 11 31 2 (2) - UAB Vilniaus kogeneracinė jėgainė 1,338 1 - 7 - 14 (1) - UAB Elektroninių mokėjimų agentūra - - - 20 - 7 - - UAB Kauno kogeneracinė jėgainė - - - 50 - 41 (1) - UAB Energijos Sprendimų centras - - - 20 - 16 - - Other related parties EPSO-G UAB - - - 202,307 378 - - - Total 22,986 9,378 5,552 271,689 61,961 632 (85) (217)

During the period from 1 January to 31 March 2017 the Company accounted for EUR 61,455 thousand of dividend revenue from subsidiaries.

The Company’s transactions with related parties during the period from 1 January to 31 March 2016 and balances arising on these transactions as at 31 December 2016 are presented below:

Related parties Amounts payable

Amounts receivable

Finance income Sales Finance

expenses Purchases

2016.12.31 2016.12.31 2016 I Q 2016 I Q 2016 I Q 2016 I Q Subsidiaries AB Energijos Skirstymo Operatorius 5,823 235 29,061 452 111 - „Lietuvos energijos gamyba“ AB 17,202 1,099 - 182 87 - UAB Lietuvos dujų tiekimas 6,008 24 - 83 - - NT Valdos, UAB 4,946 33 1,250 50 - 87 UAB Energetikos paslaugų ir rangos organizacija - 2,967

- 39

- -

UAB Verslo aptarnavimo centras 79 26 - - 40 Energijos tiekimas UAB - 28 - 5 - - UAB LITGAS - 18 590 - - - UAB Technologijų ir inovacijų centras 62 20 - - - 43 UAB VAE SPB - 1 - - - - VšĮ Energetikų mokymų centras - 2 - - - - Tuuleenergia OU - 4,902 49 - - - UAB Duomenų logistikos centras 54 7 8 11 - - UAB EURAKRAS 1,067 14 - - - - UAB Vilniaus kogeneracinė jėgainė - 5,011 - - - - UAB Elektroninių mokėjimų agentūra - 11 - - - - UAB Kauno kogeneracinė jėgainė - 80 - - - - Other related parties - - - - EPSO-G UAB - 210,410 789 - - - Total 35,241 224,888 31,747 822 198 170

During the period from 1 January to 31 March 2016 the Company accounted for EUR 30,311 thousand of dividend revenue from subsidiaries.

F-14

245496 Olive pp138-imp 27/06/2017 09:22 Page 14

Lietuvos energija, UAB, Company code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION

For the three-month period ended 31 March 2017 All amounts in thousands of euro unless otherwise stated

14 Group of energy companies www.le.lt

10 Transactions with related parties (continued)

Management compensation:

Group Company

2017 I Q 2016 IQ 2017 I Q 2016 I Q Salaries and other short-term benefits 950 747 180 124 Whereof: Termination benefits and benefits to Board Members 110 65 18 - Number of management staff 67 70 11 10

Management includes heads of administration and their deputies.

11 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board that makes strategic decisions. In the opinion of the Management, the Group has three operating segments: – Supply and distribution of electricity, gas distribution (running by Energijos Skirstymo Operatorius, AB); – Electricity generation (running by Lietuvos Energijos Gamyba AB, Eurakras UAB, Tuuleenergia OU); – Electricity and gas trade (running by Lietuvos Dujų Tiekimas UAB, Energijos Tiekimas UAB, Litgas UAB).

To Other segments are allocated: – support services (NT Valdos UAB, Technologijų ir Inovacijų centras UAB, Verslo aptarnavimo centras UAB); – other non-core activities (UAB Energetikos paslaugų ir rangos organizacija, Duomenų logistikos centras, UAB, VšĮ Energetikų mokymo

centras); – special purpose entities which are responsible for implementation of assigned projects and construction of new cogeneration plants (VAE

SPB UAB, Kauno Kogeneracinė Jėgainė UAB and Vilniaus Kogeneracinė jėgainė); – service entities (Elektroninių mokėjimų agentūra, UAB, UAB Energijos Sprendimų centras); – also parent company Lietuvos Energija UAB, which does not constitute separate operating segment, however is disclosed separately, as

its net profit exceeds 10% of net profit of all profit reporting segments. Support service entities and special purpose entities are aggregated as none of them individually meet criteria of a an operating segment.

The Group has single geographical segment – Republic of Lithuania, electricity sales in Latvia and Estonia are considered not significant. The chief operating decision-maker monitors the results with reference to the financial reports that have been prepared using the same accounting policies as those used for the preparation of the financial statements in accordance with IFRS, i.e. information on profit or loss, including the reported amounts of revenue and expenses. The primary performance measure is EBIDTA, which is calculated based on the financial statements in accordance with IFRS and adjusted to selected items which are not recognized under IFRS. The Board of the group does not monitor assets and liabilities of the segments. Group information about operating segments during I quarter of 2017 is provided below:

2017 I Q

Supply and distribution of electricity, gas

distribution

Electricity generation

Electricity and gas

trade

Other segments Elimination of intercompany

transactions and consolidation

eliminations

Total Parent Company

Other segments

Revenue from external customers 152,348 26,191 113,592 - 5,465 12,024 309,620 Revenue from other segments 16,138 8,138 32,273 62,086 11,525 (130,160) - Total revenue 168,486 34,329 145,865 62,086 16,990 (118,136) 309,620

Expenses (134,867) (28,448) (153,932) (1,343) (17,389) 55,361 (280,618) Including:

Depreciation and amortization (12,223) (5,715) (282) - (1,990) (128) (20,338) Impairments and write-offs 749 (4,872) (49) - 29 - (4,143) Unrealized gain (loss) on revaluation of derivatives - - (1,492) - - - (1,492)

Management adjustments* 1,829 - 14,504 - - - 16,333 EBITDA 46,922 16,468 8,260 60,743 1,562 (62,647) 71,308 Operating profit (loss) 33,619 5,881 (8,067) 60,743 (399) (62,775) 29,002

Interest income 26 37 39 506 16 (197) 427 Interest (expenses) (416) (650) (145) (206) (136) 198 (1,355) Other financial income (expenses) 219 128 (9) (159) (51) (2) 126 Profit (loss) before income tax 33,448 5,396 (8,182) 60,884 (570) (62,776) 28,200

Income tax (4,942) (483) (691) 33 (212) 114 (6,181) Net profit (loss) 28,506 4,913 (8,873) 60,917 (782) (62,662) 22,019

Total assets 1,113,503 872,720 152,808 1,460,202 189,413 (1,376,752) 2,411,894

F-15

245496 Olive pp138-imp 27/06/2017 09:22 Page 15

Lietuvos energija, UAB, Company code 301844044, Žvejų g. 14, LT-09310 Vilnius, Lithuania NOTES TO THE CONDENSED INTERIM FINANCIAL INFORMATION

For the three-month period ended 31 March 2017 All amounts in thousands of euro unless otherwise stated

15 Group of energy companies www.le.lt

11 Segment reporting (continued)

Group information about operating segments during I quarter of 2016 is provided below:

2016 I Q

Supply and distribution of electricity, gas

distribution

Electricity generation

Electricity and gas

trade

Other segments Elimination of intercompany

transactions and consolidation eliminations

Total Parent Company

Other segments

Revenue from external customers 164,571 49,944 122,023 1 5,890 (7,330) 335,099 Revenue from other segments 17,881 5,515 20,275 31,131 11,917 (86,719) - Total revenue 182,452 55,459 142,298 31,132 17,807 (94,049) 335,099 Expenses (145,808) (36,136) (127,684) (1,089) (19,177) 43,577 (286,317) Including:

Depreciation and amortization (11,072) (5,826) (27) - (1,970) 24 (18,871) Impairments and write-offs (1,149) (5,857) 18 - (10) - (6,998) Unrealized gain (loss) on revaluation of derivatives - - 102 - - - 102

Management adjustments* (6,108) - (990) - - - (7,098) EBITDA 42,757 31,006 13,531 30,043 610 (50,496) 67,451 Operating profit (loss) 36,644 19,323 14,614 30,043 (1,370) (50,472) 48,782

Interest income 51 62 29 1,455 - (792) 805 Interest (expenses) (473) (850) (675) (145) (81) 800 (1,424) Other financial income (expenses) 149 (431) 26 (117) (37) (8) (418) Profit (loss) before income tax 36,371 18,104 13,994 31,236 (1,488) (50,472) 47,745 Income tax (5,573) (3,884) (2,821) (157) (117) 87 (12,465) Net profit (loss) 30,798 14,220 11,173 31,079 (1,605) (50,385) 35,280

Total assets at 31 March 2016 1,052,723 904,953 125,742 1,421,901 153,780 (1,311,300) 2,347,799

*Management adjustments applied while arriving at EBITDA are related to Gazprom gas price reduction and excessive profits from regulated activities recognition (Electricity and gas trade segment). 12 Events after the reporting period

Declared dividends

Based on the Lithuanian Finance Ministry’s Order issued on 12 April 2017, the Company's set of consolidated financial statements for 2016 was approved, and EUR 59,752 thousand dividends for the state-owned shares of the Company for period of 2016 July – December were declared.

The ordinary general meeting of shareholders of Energijos tiekimas UAB was held on 4 April 2017 where it was decided to approve the profit appropriation for 2016 and distribution of EUR 10,000 thousand dividends. Dividends attributable to the Company amount to EUR 10,000 thousand.

The ordinary general meeting of shareholders of UAB LITGAS was held on 3 April 2017 where it was decided to approve the profit appropriation for 2016 and distribution of EUR 3,000 thousand dividends. Dividends attributable to the Company amount to EUR 3,000 thousand.

*********

F-16

245496 Olive pp138-imp 27/06/2017 09:22 Page 16

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F-17

245496 Olive pp138-imp 27/06/2017 09:22 Page 17

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nanc

ial r

epor

ting

pro

cess

.

Au

dit

or’s

res

pon

sibi

liti

es fo

r th

e au

dit

of t

he

fin

anci

al s

tate

men

ts

Our

obj

ecti

ves

are

to o

btai

n re

ason

able

ass

uran

ce a

bout

whe

ther

the

finan

cial

sta

tem

ents

as

a w

hole

are

free

from

mat

eria

l mis

stat

emen

t, w

heth

er d

ue to

frau

d or

err

or, a

nd to

issu

e an

aud

itor

’s r

epor

t tha

t inc

lude

s ou

r op

inio

n. R

easo

nabl

e as

sura

nce

is a

hig

h le

vel o

f ass

uran

ce,

but i

s no

t a g

uara

ntee

that

an

audi

t con

duct

ed in

acc

orda

nce

wit

h IS

As

will

alw

ays

dete

ct a

mat

eria

l mis

stat

emen

t whe

n it

exi

sts.

M

isst

atem

ents

can

ari

se fr

om fr

aud

or e

rror

and

are

con

side

red

mat

eria

l if,

indi

vidu

ally

or

in th

e ag

greg

ate,

they

cou

ld r

easo

nabl

y be

ex

pect

ed to

influ

ence

the

econ

omic

dec

isio

ns o

f use

rs ta

ken

on th

e ba

sis

of th

ese

finan

cial

sta

tem

ents

.

As

part

of a

n au

dit i

n ac

cord

ance

wit

h IS

As,

we

exer

cise

pro

fess

iona

l jud

gmen

t and

mai

ntai

n pr

ofes

sion

al s

cept

icis

m th

roug

hout

the

audi

t. W

e al

so:

� Id

enti

fy a

nd a

sses

s th

e ri

sks

of m

ater

ial m

isst

atem

ent o

f the

fin

anci

al s

tate

men

ts, w

heth

er d

ue to

frau

d or

err

or, d

esig

n an

d pe

rfor

m

audi

t pro

cedu

res

resp

onsi

ve to

thos

e ri

sks,

and

obt

ain

audi

t evi

denc

e th

at is

suf

ficie

nt a

nd a

ppro

pria

te to

pro

vide

a b

asis

for

our

opin

ion.

F-18

245496 Olive pp138-imp 27/06/2017 09:22 Page 18

The

risk

of n

ot d

etec

ting

a m

ater

ial m

isst

atem

ent r

esul

ting

from

frau

d is

hig

her

than

for

one

resu

ltin

g fr

om e

rror

, as

frau

d m

ay in

volv

e co

llusi

on, f

orge

ry, i

nten

tion

al o

mis

sion

s, m

isre

pres

enta

tion

s, o

r th

e ov

erri

de o

f int

erna

l con

trol

. �

Obt

ain

an u

nder

stan

ding

of i

nter

nal c

ontr

ol r

elev

ant t

o th

e au

dit i

n or

der

to d

esig

n au

dit p

roce

dure

s th

at a

re a

ppro

pria

te in

the

circ

umst

ance

s, b

ut n

ot fo

r th

e pu

rpos

e of

exp

ress

ing

an o

pini

on o

n th

e ef

fect

iven

ess

of th

e C

ompa

ny’s

and

Gro

up’s

inte

rnal

con

trol

. �

Eva

luat

e th

e ap

prop

riat

enes

s of

acc

ount

ing

polic

ies

used

and

the

reas

onab

lene

ss o

f acc

ount

ing

esti

mat

es a

nd r

elat

ed d

iscl

osur

es m

ade

by m

anag

emen

t.

� C

oncl

ude

on th

e ap

prop

riat

enes

s of

man

agem

ent’s

use

of t

he g

oing

con

cern

bas

is o

f acc

ount

ing

and,

bas

ed o

n th

e au

dit e

vide

nce

obta

ined

, whe

ther

a m

ater

ial u

ncer

tain

ty e

xist

s re

late

d to

eve

nts

or c

ondi

tion

s th

at m

ay c

ast s

igni

fican

t dou

bt o

n th

e C

ompa

ny’

s an

d G

roup

’s a

bilit

y to

con

tinu

e as

a g

oing

con

cern

. If w

e co

nclu

de th

at a

mat

eria

l unc

erta

inty

exi

sts,

we

are

requ

ired

to d

raw

att

enti

on in

our

au

dito

r’s

repo

rt to

the

rela

ted

disc

losu

res

in th

e fin

anci

al s

tate

men

ts o

r, if

suc

h di

sclo

sure

s ar

e in

adeq

uate

, to

mod

ify o

ur o

pini

on. O

ur

conc

lusi

ons

are

base

d on

the

audi

t evi

denc

e ob

tain

ed u

p to

the

date

of o

ur a

udit

or’s

rep

ort.

How

ever

, fut

ure

even

ts o

r co

ndit

ions

may

ca

use

the

Com

pany

and

Gro

up to

cea

se to

con

tinu

e as

a g

oing

con

cern

. �

Eva

luat

e th

e ov

eral

l pre

sent

atio

n, s

truc

ture

and

con

tent

of t

he fi

nanc

ial s

tate

men

ts, i

nclu

ding

the

disc

losu

res,

and

whe

ther

the

finan

cial

st

atem

ents

rep

rese

nt th

e un

derl

ying

tran

sact

ions

and

eve

nts

in a

man

ner

that

ach

ieve

s fa

ir p

rese

ntat

ion.

� O

btai

n su

ffic

ient

app

ropr

iate

aud

it e

vide

nce

rega

rdin

g th

e fin

anci

al in

form

atio

n of

the

enti

ties

or

busi

ness

act

ivit

ies

wit

hin

the

Gro

up to

ex

pres

s an

opi

nion

on

the

cons

olid

ated

fina

ncia

l sta

tem

ents

. We

are

resp

onsi

ble

for

the

dire

ctio

n, s

uper

visi

on a

nd p

erfo

rman

ce o

f the

G

roup

aud

it. W

e re

mai

n so

lely

res

pons

ible

for

our

audi

t opi

nion

.

We

com

mun

icat

e w

ith

thos

e ch

arge

d w

ith

gove

rnan

ce r

egar

ding

, am

ong

othe

r m

atte

rs, t

he p

lann

ed s

cope

and

tim

ing

of th

e au

dit a

nd

sign

ifica

nt a

udit

find

ings

, inc

ludi

ng a

ny s

igni

fican

t def

icie

ncie

s in

inte

rnal

con

trol

that

we

iden

tify

dur

ing

our

audi

t.

On

beha

lf of

Pri

cew

ater

hous

eCoo

pers

UA

B

Rim

vyda

s Jo

gėla

G

ener

al M

anag

er

Aud

itor

's C

erti

fica

te N

o.00

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V

ilniu

s, R

epub

lic o

f Lit

huan

ia

3 A

pril

2017

V

yten

is L

azau

skas

A

udit

or's

Cer

tifi

cate

No.

0005

36

F-19

245496 Olive pp138-imp 27/06/2017 09:22 Page 19

112

A

NN

UA

L R

EPO

RT 2

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|

F-20

245496 Olive pp138-imp 27/06/2017 09:22 Page 20

113

AN

NU

AL R

EPO

RT 2

016

|

CON

SOLI

DA

TED

AN

D C

OM

PAN

Y’S

FI

NA

NCI

AL

STA

TEM

ENTS

fo

r th

e ye

ar e

nded

31

Dec

embe

r 20

16,

prep

ared

acc

ordi

ng t

o In

tern

atio

nal F

inan

cial

Rep

orti

ng S

tand

ards

as

adop

ted

by t

he E

urop

ean

Uni

on,

pres

ente

d to

geth

er w

ith

inde

pend

ent

audi

tor’

s re

port

Th

e Co

mpa

ny’s

and

the

Gro

up’s

cons

olid

ated

fina

ncia

l sta

tem

ents

wer

e ap

prov

ed b

y Li

etuv

os E

nerg

ija U

AB m

anag

emen

t and

sig

ned

on 3

Apr

il 20

17:

D

aliu

s M

isiū

nas

Chie

f Exe

cutiv

e O

ffice

r

Dar

ius

Kaša

uska

s Fi

nanc

e an

d Tr

easu

ry D

irect

or

G

iedr

uolė

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bien

ė Ve

rslo

Apt

arna

vim

o Ce

ntra

s U

AB, H

ead

of

Acco

untin

g Se

rvic

es C

entr

e ac

ting

unde

r Ord

er N

o IS

17-2

0 of

22

Febr

uary

201

7

Dal

iM

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ril 2

017:

F-21

245496 Olive pp138-imp 27/06/2017 09:22 Page 21

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tuvo

s E

ne

rgija

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ompa

ny c

ode

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vejų

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no

n-c

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t assets

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vent

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s 11

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F-22

245496 Olive pp138-imp 27/06/2017 09:22 Page 22

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F-23

245496 Olive pp138-imp 27/06/2017 09:22 Page 23

ST

AT

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RO

FIT

AN

D L

OS

S A

ND

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R C

OM

PR

EH

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27

,38

1,07

0,54

2 1,

048,

021

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2

1

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er re

venu

e 28

31

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47

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2

2

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dend

s 35

-

- 69

,525

93

,825

T

ota

l re

ve

nu

e

1,1

01,6

30

1,0

95,7

66

71,3

29

95,8

19

Op

era

tin

g e

xp

en

ses

Purc

hase

s of

ele

ctric

ity, g

as fo

r tra

de

and

rela

ted

serv

ices

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(691

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61,4

90)

-

-

Purc

hase

s of

gas

and

hea

vy fu

el o

il fo

r pro

duct

ion

(3

5,68

9)

(12,

511)

- -

De

prec

iatio

n an

d am

ortis

atio

n 5,

6,21

(7

8,51

8)

(74,

237)

(3)

(3)

W

ages

and

sal

arie

s an

d re

late

d ex

pens

es

(86,

065)

(9

3,70

5)

(3

,372

) (2

,735

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Repa

ir an

d m

aint

enan

ce e

xpen

ses

(2

2,76

5)

(27,

196)

- -

Re

valu

atio

n of

Pro

perty

, pla

nt a

nd

equi

pmen

t, an

d in

vest

men

t pro

perty

6,

7 33

6 (1

,277

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- -

Re

vers

al o

f im

pairm

ent o

f in

vest

men

ts in

sub

sidi

arie

s 8

- -

20

,869

16

,216

Impa

irmen

t of P

rope

rty, p

lant

and

eq

uipm

ent

6 (5

66)

(30,

133)

- -

O

ther

exp

ense

s 30

(3

9,27

4)

(30,

124)

(5,9

73)

(1,7

71)

To

tal

op

era

tin

g e

xp

en

se

s

(9

54,2

79)

(1,0

30,6

73)

11,5

21

11,7

07

Fi

nanc

e in

com

e 31

3,

720

5,63

2

13,

526

6,0

60

Fi

nanc

e co

sts

32

(6,8

56)

(6,5

49)

(1

,232

) (2

,321

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Pro

fit

(lo

ss)

befo

re t

ax

144,2

15

64,1

76

95,1

44

111,2

65

Cu

rrent

yea

r inc

ome

tax

expe

nse

34

(13,

373)

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,140

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3)

(2

62)

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ferre

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e ta

x (e

xpen

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enef

it 20

, 34

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404)

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,740

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1

4

Net

pro

fit

(lo

ss)

118,4

38

55,2

96

95,1

55

111,0

17

At

tribu

tabl

e to

:

Own

ers

of th

e pa

rent

108,

105

49,2

16

95,1

55

111,

017

Non-

cont

rollin

g in

tere

sts

1

0,33

3

6,08

0 -

-

N

ote

s

Gro

up

Co

mp

an

y

2016

2015

2016

2015

Oth

er

co

mp

reh

en

siv

e in

co

me (

loss

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Item

s t

hat

will

no

t b

e r

ecla

ssif

ied

su

bseq

uen

tly t

o p

rofi

t o

r lo

ss)

Gai

n (lo

ss) o

n re

valu

atio

n of

non

-cu

rrent

ass

ets

385

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0 -

- It

em

s t

hat

will

no

t b

e r

ecla

ssif

ied

su

bs

eq

uen

tly t

o p

rofi

t o

r lo

ss, to

tal

385

1,0

80

- -

Item

s t

hat

will

be r

ecla

ssif

ied

su

bseq

uen

tly t

o p

rofi

t o

r lo

ss

Chan

ge in

fair

valu

e of

ava

ilabl

e-fo

r-sa

le fi

nanc

ial a

sset

s

(4

8)

(26)

(4

8)

(26)

It

em

s t

hat

will

be r

ecla

ssif

ied

su

bseq

uen

tly t

o p

rofi

t o

r lo

ss, to

tal

(4

8)

(26

) (4

8)

(26

)

Oth

er

co

mp

reh

en

siv

e in

co

me (

loss

)

337

1,0

54

(48)

(26)

To

tal co

mp

reh

en

siv

e in

co

me (

loss)

for

the y

ear

118,7

75

56,3

50

95,1

07

110,9

91

At

tribu

tabl

e to

:

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of th

e pa

rent

108,

442

50,2

56

95,1

07

110,

991

Non-

cont

rollin

g in

tere

sts

1

0,33

3

6,09

4 -

-

F-24

245496 Olive pp138-imp 27/06/2017 09:22 Page 24

ST

AT

EM

EN

T O

F C

HA

NG

ES

IN

EQ

UIT

Y

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erwi

se s

tate

d

117

AN

NU

AL R

EPO

RT 2

016

|

Gro

up

N

ote

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Eq

uit

y a

ttri

bu

tab

le t

o o

wn

ers

of

the G

rou

p

Sh

are

cap

ital

Leg

al

reserv

e

Re

va

lua

tio

n

reserv

e

Oth

er

reserv

es

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ined

e

arn

ing

s

Su

bto

tal

No

n-

co

ntr

ollin

g

inte

rest

To

tal

Bala

nc

e a

t 1 J

an

uary

2015

1,2

10,5

68

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62

67,6

30

47

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47)

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60

48,8

30

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90

Reva

luat

ion

of p

rope

rty, p

lant

and

equ

ipm

ent,

net o

f def

erre

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com

e ta

x

-

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066

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6 14

1,

080

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fair

valu

e of

ava

ilabl

e-fo

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e fin

ancia

l ass

ets,

net

of

def

erre

d in

com

e ta

x

- -

- (2

6)

- (2

6)

- (2

6)

To

tal

oth

er

co

mp

reh

en

siv

e i

nco

me (

loss)

for

the y

ear

- -

1,0

66

(26

) -

1,0

40

14

1

,054

Net p

rofit

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s) fo

r the

yea

r

- -

- -

49,2

16

49,2

16

6,08

0 55

,296

T

ota

l co

mp

reh

en

siv

e in

co

me (

loss)

for

the y

ear

-

- 1

,066

(26

) 4

9,2

16

50

,25

6

6,0

94

56

,35

0

Tran

sfer

of r

eval

uatio

n re

serv

e to

reta

ined

ear

ning

s (n

et o

f de

ferre

d in

com

e ta

x)

-

- (6

,614

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6,61

4 -

- -

Tran

sfer

to re

serv

es a

nd m

ovem

ent i

n re

serv

es

-

4,41

3 -

27

(4,4

40)

- 9

9 Di

vide

nds

35

- -

- -

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844)

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7,84

4)

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91)

(62,

035)

Sh

are

capi

tal c

onve

rsio

n re

sult

17

1,58

8 -

- -

- 1,

588

- 1,

588

Acqu

isitio

n of

sha

res

from

non

-con

trollin

g in

tere

st

-

2 14

1 -

(166

) (2

3)

(297

) (3

20)

Corre

ctio

n of

pre

vious

yea

r erro

rs fo

r Kau

no E

nerg

etiko

s Re

mon

tas

UAB

-

- 10

0 -

(97)

3

- 3

Bala

nc

e a

t 31 D

ecem

ber

2015

1,2

12,1

56

28,7

77

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23

48

(49,2

64)

1,2

54,0

40

50,4

45

1,3

04,4

85

Bala

nc

e a

t 1 J

an

uary

2016

1,2

12,1

56

28,7

77

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23

48

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64)

1,2

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40

50,4

45

1,3

04,4

85

Reva

luat

ion

of p

rope

rty, p

lant

and

equ

ipm

ent,

net o

f def

erre

d in

com

e ta

x

-

- 38

5 -

- 38

5 -

385

Chan

ge in

fair

valu

e of

ava

ilabl

e-fo

r-sal

e fin

ancia

l ass

ets,

net

of

def

erre

d in

com

e ta

x

- -

- (4

8)

- (4

8)

- (4

8)

To

tal

oth

er

co

mp

reh

en

siv

e i

nco

me (

loss)

for

the y

ear

- -

385

(48)

- 337

- 337

Net p

rofit

(los

s) fo

r the

yea

r

- -

- -

108,

105

108,

105

10,3

33

118,

438

To

tal co

mp

reh

en

siv

e in

co

me (

loss)

for

the y

ear

-

- 385

(48)

108,1

05

108,4

42

10,3

33

118,7

75

Tran

sfer

of r

eval

uatio

n re

serv

e to

reta

ined

ear

ning

s (n

et o

f de

ferre

d in

com

e ta

x)

-

- (5

,523

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5,52

3 -

- -

Tran

sfer

to re

serv

es a

nd m

ovem

ent i

n re

serv

es

-

5,76

8 -

- (5

,768

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- -

Divi

dend

s 35

-

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- (9

7,19

4)

(97,

194)

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) (1

00,6

47)

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isitio

n of

sub

sidi

ary

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AKRA

S UA

B)

33

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9 5,

199

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non

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trollin

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st o

n re

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18

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78)

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m n

on-c

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rest

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6

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55)

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ease

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cap

ital o

f Kau

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8

- -

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- -

790

790

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nc

e a

t 31 D

ecem

ber

2016

1,2

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56

34,6

96

57,4

75

- (3

5,9

52)

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68,3

75

51,1

72

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19,5

47

F-25

245496 Olive pp138-imp 27/06/2017 09:22 Page 25

ST

AT

EM

EN

T O

F C

HA

NG

ES

IN

EQ

UIT

Y

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

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6

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mou

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UR

thou

sand

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less

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se s

tate

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118

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NU

AL R

EPO

RT 2

016

|

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mp

an

y

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tes

Sh

are

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s

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tal

Bala

nc

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t 1 J

an

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2015

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10,5

68

- 74

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23

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44,9

65

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valu

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ava

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r-sal

e fin

ancia

l ass

ets,

net

of d

efer

red

inco

me

tax

-

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6)

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6)

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tal

oth

er

co

mp

reh

en

siv

e i

nco

me (

loss)

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the y

ear

- -

(26

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(26

) Ne

t pro

fit fo

r the

yea

r

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- 11

1,01

7 11

1,01

7 T

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mp

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me f

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91

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serv

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-

4,20

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07)

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are

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tal c

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n ef

fect

17

1,

588

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- 1,

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t 31 D

ecem

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2015

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56

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07

48

83,2

89

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99,7

00

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ala

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56

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e fin

ancia

l ass

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net

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inco

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-

- (4

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8)

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oth

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co

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siv

e i

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(48

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t pro

fit fo

r the

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- 95

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F-26

245496 Olive pp138-imp 27/06/2017 09:22 Page 26

ST

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) (6

0,15

8)

1,

191

322

In

com

e ta

x (p

aid)

(2,2

29)

(12,

624)

(255

) -

Net

ca

sh

flo

ws

fro

m (

use

d i

n)

op

era

tin

g a

cti

vit

ies

251

,69

2

125

,42

8

(3

,354

) (5

,508

)

Stat

emen

t of c

ash

flows

N

ote

s

Gro

up

Co

mp

an

y

201

6

201

5

201

6

201

5

Cas

h f

low

s f

rom

in

ves

tin

g a

cti

vit

ies

(Acq

uisi

tion)

of p

rope

rty, p

lant

and

equ

ipm

ent

and

inta

ngib

le a

sset

s

(172

,946

) (1

48,7

22)

(6

5)

(280

)

Dis

posa

l of p

rope

rty, p

lant

and

equ

ipm

ent

and

inta

ngib

le a

sset

s

4,32

7 30

6

- -

Lo

ans

(gra

nted

) 9,

15

- -

(5

,191

) -

Lo

an re

paym

ents

rece

ived

29,2

01

96

29

,500

-

(A

cqui

sitio

n) d

ispo

sal o

f inv

estm

ents

in

subs

idia

ries

and

asso

ciat

es

8, 2

6 (2

7,37

8)

125

(1

04,7

26)

(54,

627)

Gra

nts

rece

ived

2,

157

9,36

2

- -

Bo

nds

rede

emed

4,53

4 14

5

4,53

4 13

1

Inte

rest

rece

ived

2,85

8 4,

629

4,

289

6,50

7

Cha

nge

in n

on-c

ontro

lling

inte

rest

resu

lting

fro

m c

hang

es in

the

Gro

up’s

stru

ctur

e

- (3

20)

-

-

Divi

dend

s re

ceive

d 35

-

-

69,5

25

93,8

25

Net

ca

sh

flo

ws

fro

m (

use

d i

n)

investi

ng

acti

vit

ies

(1

57,2

47

) (1

34,3

79

)

(2,1

34

) 45,5

56

Cas

h f

low

s f

rom

fin

an

cin

g a

cti

vit

ies

Proc

eeds

from

bor

rowi

ngs

17

2,18

9 28

2,04

8

90,3

30

-

Rep

aym

ents

of b

orro

wing

s (9

6,68

9)

(282

,031

)

- -

Fi

nanc

e le

ase

paym

ents

(155

) 12

0

- -

In

tere

st p

aid

(5

,760

) (4

,329

)

(754

) (3

72)

Divi

dend

s pa

id

35

(100

,537

) (6

2,03

5)

(9

7,19

4)

(57,

844)

In

crea

se in

sha

re c

apita

l of K

auno

K

ogen

erac

inė

Jėga

inė

UA

B

1,

317

-

- -

Ac

quis

ition

of n

on-c

ontro

lling

inte

rest

(9,0

55)

Net

ca

sh

flo

ws

fro

m (

use

d i

n)

fin

an

cin

g

acti

vit

ies

(38

,69

0)

(66

,22

7)

(7

,618

) (5

8,2

16)

Incre

as

e (

de

cre

ase

) in

cas

h a

nd

ca

sh

eq

uiv

ale

nts

(in

clu

din

g o

verd

raft

)

55,7

55

(7

5,1

78)

(1

3,1

06)

(18

,16

8)

C

ash

and

cash

equ

ival

ents

(inc

ludi

ng

over

draf

t) at

the

begi

nnin

g of

the

year

16

12

2,81

0 19

7,98

8

13,1

79

31,3

47

Cas

h a

nd

cas

h e

qu

ivale

nts

(in

clu

din

g

overd

raft

) at

the e

nd

of

the y

ear

16

178

,56

5

122

,81

0

73

13,1

79

F-27

245496 Olive pp138-imp 27/06/2017 09:22 Page 27

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

120

AN

NU

AL R

EPO

RT 2

016

|

1 G

ener

al in

form

atio

n

Liet

uvos

Ene

rgija

UA

B (h

erei

nafte

r “th

e C

ompa

ny”)

is a

priv

ate

limite

d lia

bilit

y co

mpa

ny re

gist

ered

in

the

Rep

ublic

of L

ithua

nia.

The

Com

pany

’s re

gist

ered

offi

ce a

ddre

ss is

Žve

jų g

. 14,

LT-

0931

0, V

ilniu

s,

Lith

uani

a. T

he C

ompa

ny is

a li

mite

d lia

bilit

y pr

ofit-

orie

nted

ent

ity re

gist

ered

on

28 A

ugus

t 200

8 wi

th

the

Reg

ister

of L

egal

Ent

ities m

anag

ed b

y th

e pu

blic

inst

itutio

n th

e C

entre

of R

egist

ers.

Com

pany

code

30

1844

044,

VA

T pa

yer’s

cod

e LT

1000

4278

519.

The

Com

pany

has

bee

n fo

unde

d fo

r an

inde

finite

pe

riod.

The

Com

pany

is a

par

ent c

ompa

ny, w

hich

is re

spon

sibl

e fo

r the

man

agem

ent a

nd c

oord

inat

ion

of

activ

ities

of g

roup

com

pani

es e

ngag

ed i

n el

ectri

city

and

heat

gen

erat

ion

(inclu

ding

ele

ctric

ity

gene

ratio

n fro

m r

enew

able

ene

rgy

sour

ces)

, su

pply,

ele

ctric

ity im

port

and

expo

rt, d

istrib

utio

n an

d tra

de, n

atur

al g

as d

istrib

utio

n an

d su

pply,

as

well

as in

ser

vice

and

deve

lopm

ent o

f ele

ctric

ene

rgy

indu

stry

.

The

Com

pany

ana

lyses

the

activ

ities

of g

roup

com

pani

es, r

epre

sent

s th

e wh

ole

grou

p, im

plem

ents

its

shar

ehol

ders

’ rig

hts

and

oblig

atio

ns,

defin

es o

pera

tion

guid

elin

es a

nd r

ules

, an

d co

ordi

nate

s th

e ac

tivitie

s in

the

field

s of

fina

nce,

law,

stra

tegy

and

dev

elop

men

t, hu

man

reso

urce

s, ri

sk m

anag

emen

t, au

dit,

tech

nolo

gy, c

omm

unica

tion

and

othe

rs.

The

Com

pany

see

ks t

o en

sure

effe

ctive

ope

ratio

n of

gro

up c

ompa

nies

, im

plem

enta

tion

of g

oals

rela

ted

to th

e gr

oup’

s ac

tiviti

es s

et fo

rth in

the

Nat

iona

l Ene

rget

ic In

depe

nden

ce S

trate

gy a

nd o

ther

le

gal a

cts,

ens

urin

g th

at it

bui

lds

a su

stai

nabl

e va

lue

in a

soc

ially

resp

onsi

ble

man

ner.

The

Com

pany

is w

holly

own

ed b

y th

e St

ate

of th

e R

epub

lic o

f Lith

uani

a.

Com

pany

’s s

hare

hold

er

31 D

ecem

ber

2016

31 D

ecem

ber

2015

Sh

are

cap

ital

%

Sh

are

cap

ital

%

Repu

blic

of L

ithua

nia

repr

esen

ted

by

the

Lith

uani

an M

inist

ry o

f Fin

ance

1,

212,

156

10

0.00

1,21

2,15

6

100.

00

As a

t 31

Dec

embe

r 201

6, th

e G

roup

and

the

Com

pany

had

4,8

59 a

nd 1

03 e

mpl

oyee

s, re

spec

tivel

y (3

1 D

ecem

ber 2

015:

5,3

79 a

nd 7

8 em

ploy

ees,

resp

ectiv

ely)

. Th

e C

ompa

ny’s

man

agem

ent a

ppro

ved

thes

e fin

anci

al s

tate

men

ts o

n 3

April

201

7. T

he C

ompa

ny’s

sh

areh

olde

rs h

ave

a st

atut

ory

right

to a

ppro

ve o

r not

to a

ppro

ve th

ese

finan

cial

sta

tem

ents

and

requ

ire

that

man

agem

ent p

repa

re a

new

set

of f

inan

cial

sta

tem

ents

.

2 Su

mm

ary

of s

igni

fican

t acc

ount

ing

polic

ies

Th

e pr

inci

pal a

ccou

ntin

g po

licie

s ad

opte

d in

the

pre

para

tion

of t

he C

ompa

ny's

and

the

Gro

up’s

fin

anci

al s

tate

men

ts fo

r the

yea

r end

ed 3

1 D

ecem

ber 2

016

are

sum

mar

ized

belo

w.

2.1

Basi

s of

pre

para

tion

Thes

e fin

anci

al s

tate

men

ts h

ave

been

pre

pare

d in

acc

orda

nce

with

and

com

ply

with

Int

erna

tiona

l Fi

nanc

ial R

epor

ting

Stan

dard

s (IF

RS) a

s ad

opte

d by

the

Euro

pean

Uni

on.

The

Gro

up’s

and

the

Com

pany

’s fi

nanc

ial s

tate

men

ts a

s at

and

for t

he y

ear e

nded

31

Dec

embe

r 201

6 ha

ve b

een

prep

ared

on

a hi

stor

ical c

ost b

asis,

exc

ept f

or p

rope

rty, p

lant

and

equ

ipm

ent m

easu

red

at

reva

lued

am

ount

, in

vest

men

t pr

oper

ty,

emiss

ion

allo

wanc

es a

nd c

erta

in f

inan

cial

ins

trum

ents

m

easu

red

at fa

ir va

lue.

a)

Adop

tion

of n

ew a

nd/o

r am

ende

d In

tern

atio

nal F

inan

cial

Rep

ortin

g St

anda

rds

(IFR

Ss) a

nd

inte

rpre

tatio

ns o

f the

Inte

rnat

iona

l Fin

anci

al R

epor

ting

Inte

rpre

tatio

ns C

omm

ittee

(IFR

IC)

The

follo

wing

IFRS

s an

d am

endm

ents

wer

e re

leva

nt to

the

Gro

up a

nd th

e C

ompa

ny a

nd w

ere

adop

ted

for t

he fi

rst t

ime

in th

e fin

anci

al y

ear e

nded

31

Dec

embe

r 201

6:

Annu

al Im

prov

emen

ts to

IFR

Ss 2

012

(effe

ctive

for a

nnua

l per

iods

beg

inni

ng o

n or

afte

r 1 F

ebru

ary

2015

). Th

e im

prov

emen

ts c

onsis

t of c

hang

es to

sev

en s

tand

ards

. IF

RS

2 w

as a

men

ded

to c

larif

y th

e de

finiti

on o

f a

‘ves

ting

cond

ition

’ an

d to

def

ine

sepa

rate

ly

‘per

form

ance

con

ditio

n’ a

nd ‘s

ervi

ce c

ondi

tion’

; The

am

endm

ent i

s ef

fect

ive

for s

hare

-bas

ed p

aym

ent

trans

actio

ns fo

r whi

ch th

e gr

ant d

ate

is on

or a

fter 1

Jul

y 20

14.

IFR

S 3

was

amen

ded

to c

larif

y th

at (1

) an

oblig

atio

n to

pay

con

tinge

nt c

onsi

dera

tion

whic

h m

eets

the

defin

ition

of a

fina

ncia

l ins

trum

ent i

s cl

assi

fied

as a

fina

ncia

l lia

bility

or a

s eq

uity

, on

the

basi

s of

the

defin

ition

s in

IAS

32, a

nd (2

) all

non-

equi

ty c

ontin

gent

con

side

ratio

n, b

oth

finan

cial

and

non

-fina

ncia

l, is

mea

sure

d at

fair

valu

e at

eac

h re

porti

ng d

ate,

with

cha

nges

in fa

ir va

lue

reco

gnis

ed in

pro

fit a

nd

loss

. Am

endm

ents

to IF

RS

3 ar

e ef

fect

ive

for b

usin

ess

com

bina

tions

whe

re th

e ac

quisi

tion

date

is o

n or

afte

r 1 J

uly

2014

. IF

RS

8 wa

s am

ende

d to

requ

ire (1

) disc

losu

re o

f the

judg

emen

ts m

ade

by m

anag

emen

t in

aggr

egat

ing

oper

atin

g se

gmen

ts, i

nclu

ding

a d

escr

iptio

n of

the

segm

ents

whi

ch h

ave

been

agg

rega

ted

and

the

econ

omic

indi

cato

rs w

hich

hav

e be

en a

sses

sed

in d

eter

min

ing

that

the

aggr

egat

ed s

egm

ents

sha

re

simila

r eco

nom

ic c

hara

cter

istic

s, a

nd (2

) a re

conc

iliatio

n of

seg

men

t ass

ets

to th

e en

tity’

s as

sets

whe

n se

gmen

t ass

ets

are

repo

rted.

Th

e ba

sis fo

r con

clus

ions

on

IFR

S 13

was

am

ende

d to

cla

rify

that

del

etio

n of

cer

tain

par

agra

phs

in

IAS

39 u

pon

publ

ishin

g of

IFR

S 13

was

not

mad

e wi

th a

n in

tent

ion

to re

mov

e th

e ab

ility

to m

easu

re

shor

t-ter

m re

ceiva

bles

and

pay

able

s at

invo

ice a

mou

nt w

here

the

impa

ct o

f dis

coun

ting

is im

mat

eria

l. Th

e ch

ange

s di

d no

t hav

e m

ater

ial im

pact

on

the

finan

cial

sta

tem

ents

. IA

S 16

and

IAS

38 w

ere

amen

ded

to c

larif

y ho

w th

e gr

oss

carry

ing

amou

nt a

nd th

e ac

cum

ulat

ed

depr

ecia

tion

are

treat

ed w

here

an

entit

y us

es th

e re

valu

atio

n m

odel

. The

Gro

up h

as c

onsi

dere

d th

e cl

arific

atio

n an

d co

nclu

ded

that

it fo

llows

the

clar

ificat

ion,

ther

efor

e no

impa

ct.

IAS

24 w

as a

men

ded

to in

clude

, as

a re

late

d pa

rty, a

n en

tity t

hat p

rovid

es k

ey m

anag

emen

t per

sonn

el

serv

ices

to th

e re

porti

ng e

ntity

or t

o th

e pa

rent

of t

he re

porti

ng e

ntity

(‘th

e m

anag

emen

t ent

ity’),

and

to

requ

ire to

disc

lose

the

amou

nts

char

ged

to th

e re

porti

ng e

ntity

by

the

man

agem

ent e

ntity

for s

ervic

es

prov

ided

. The

Gro

up a

nd th

e C

ompa

ny h

ave

cons

ider

ed th

e cl

arific

atio

n an

d co

nclu

ded

that

ther

e no

en

titie

s, p

rovid

ing

key

man

agem

ent p

erso

nnel

ser

vices

to th

e G

roup

and

the

Com

pany

, the

refo

re th

e am

endm

ent d

id n

ot h

ave

impa

ct o

n th

e fin

anci

al s

tate

men

ts.

Cla

rific

atio

n of

Acc

epta

ble

Met

hods

of D

epre

ciat

ion

and

Amor

tisat

ion

- Am

endm

ents

to IA

S 16

and

IA

S 38

(effe

ctive

for a

nnua

l per

iods

beg

inni

ng o

n or

afte

r 1 J

anua

ry 2

016)

. In

this

amen

dmen

t, th

e IA

SB h

as c

larif

ied

that

the

use

of re

venu

e-ba

sed

met

hods

to c

alcu

late

the

depr

ecia

tion

of a

n as

set i

s no

t app

ropr

iate

bec

ause

reve

nue

gene

rate

d by

an

activ

ity th

at in

clud

es th

e us

e of

an

asse

t gen

eral

ly re

flect

s fa

ctor

s ot

her

than

the

con

sum

ptio

n of

the

econ

omic

bene

fits

embo

died

in th

e as

set.

The

clar

ificat

ion

did

not

impa

ct o

n th

e G

roup

and

the

Com

pany

as

depr

ecia

tion

and

amor

tisat

ion

are

calc

ulat

ed o

n a

stra

ight

-line

bas

is.

Equi

ty M

etho

d in

Sep

arat

e Fi

nanc

ial S

tate

men

ts -

Amen

dmen

ts to

IAS

27 (e

ffect

ive

for a

nnua

l per

iods

be

ginn

ing

on o

r afte

r 1 J

anua

ry 2

016)

. The

am

endm

ents

will

allo

w en

titie

s to

use

the

equi

ty m

etho

d to

acc

ount

for

inve

stm

ents

in s

ubsi

diar

ies,

join

t ven

ture

s an

d as

soci

ates

in th

eir s

epar

ate

finan

cial

st

atem

ents

. Th

e C

ompa

ny h

as c

onsi

dere

d th

e am

endm

ent

and

deci

ded

to k

eep

the

exis

ting

acco

untin

g po

licie

s.

F-28

245496 Olive pp138-imp 27/06/2017 09:22 Page 28

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

121

AN

NU

AL R

EPO

RT 2

016

|

Disc

losu

re In

itiat

ive –

Am

endm

ents

to IA

S 1

(effe

ctive

for

annu

al p

erio

ds b

egin

ning

on

or a

fter

1 Ja

nuar

y 20

16).

The

Stan

dard

was

am

ende

d to

cla

rify

the

conc

ept o

f mat

eria

lity a

nd e

xpla

ins

that

an

entit

y ne

ed n

ot p

rovid

e a

spec

ific d

isclo

sure

requ

ired

by a

n IF

RS

if th

e in

form

atio

n re

sulti

ng fr

om th

at

disc

losu

re is

not

mat

eria

l, ev

en if

the

IFR

S co

ntai

ns a

list

of s

pecif

ic re

quire

men

ts o

r des

crib

es th

em

as m

inim

um r

equi

rem

ents

. Th

e St

anda

rd a

lso p

rovid

es n

ew g

uida

nce

on s

ubto

tals

in f

inan

cial

st

atem

ents

, in

parti

cula

r, su

ch s

ubto

tals

(a) s

houl

d be

com

pris

ed o

f lin

e ite

ms

mad

e up

of a

mou

nts

reco

gnis

ed a

nd m

easu

red

in a

ccor

danc

e wi

th IF

RS; (

b) b

e pr

esen

ted

and

labe

lled

in a

man

ner t

hat

mak

es th

e lin

e ite

ms

that

con

stitu

te th

e su

btot

al c

lear

and

und

erst

anda

ble;

(c)

be

cons

isten

t fro

m

perio

d to

per

iod;

and

(d) n

ot b

e di

spla

yed

with

mor

e pr

omin

ence

than

the

subt

otal

s an

d to

tals

requ

ired

by I

FRS

stan

dard

s. T

he G

roup

and

the

Com

pany

hav

e re

viewe

d di

sclo

sure

s in

the

fin

anci

al

stat

emen

ts a

nd e

limin

ated

imm

ater

ial

item

s.

Oth

er s

tand

ards

, am

endm

ents

and

inte

rpre

tatio

ns e

ffect

ive fo

r ann

ual p

erio

ds b

egin

ning

on

1 Ja

nuar

y 20

16 w

ere

not r

elev

ant f

or th

e G

roup

/Com

pany

:

b)

New

sta

ndar

ds, a

men

dmen

ts a

nd in

terp

reta

tions

that

are

not

yet

effe

ctive

O

ther

new

sta

ndar

ds, a

men

dmen

ts a

nd in

terp

reta

tions

effe

ctive

for a

nnua

l per

iods

beg

inni

ng o

n or

af

ter 1

Jan

uary

201

7 th

at h

ave

not b

een

adop

ted

in p

repa

ring

thes

e fin

anci

al s

tate

men

ts:

IFR

S 9,

Fin

anci

al In

stru

men

ts: C

lass

ificat

ion

and

Mea

sure

men

t (ef

fect

ive

for a

nnua

l per

iods

beg

inni

ng

on o

r afte

r 1 J

anua

ry 2

018)

. Key

feat

ures

of t

he n

ew s

tand

ard

are:

Fi

nanc

ial

asse

ts a

re r

equi

red

to b

e cl

assif

ied

into

thr

ee m

easu

rem

ent

cate

gorie

s: t

hose

to

be

mea

sure

d su

bseq

uent

ly at

am

ortis

ed c

ost,

thos

e to

be

mea

sure

d su

bseq

uent

ly at

fair

valu

e th

roug

h ot

her c

ompr

ehen

sive

inco

me

(FVO

CI)

and

thos

e to

be

mea

sure

d su

bseq

uent

ly at

fair

valu

e th

roug

h pr

ofit

or lo

ss (F

VPL)

.

Cla

ssifi

catio

n fo

r deb

t ins

trum

ents

is d

riven

by

the

entit

y’s

busi

ness

mod

el fo

r man

agin

g th

e fin

anci

al

asse

ts a

nd w

heth

er th

e co

ntra

ctua

l cas

h flo

ws r

epre

sent

sol

ely

paym

ents

of p

rincip

al a

nd in

tere

st

(SPP

I). If

a d

ebt i

nstru

men

t is

held

to c

olle

ct, i

t may

be

carri

ed a

t am

ortis

ed c

ost i

f it a

lso m

eets

the

SPPI

requ

irem

ent.

Deb

t ins

trum

ents

that

mee

t the

SPP

I req

uire

men

t tha

t are

hel

d in

a p

ortfo

lio w

here

an

ent

ity b

oth

hold

s to

col

lect

ass

ets’

cas

h flo

ws a

nd se

lls a

sset

s may

be

clas

sifie

d as

FVO

CI. F

inan

cial

as

sets

tha

t do

not

con

tain

cas

h flo

ws t

hat

are

SPPI

mus

t be

mea

sure

d at

FVP

L (fo

r ex

ampl

e,

deriv

ative

s). E

mbe

dded

der

ivativ

es a

re n

o lo

nger

sep

arat

ed fr

om fi

nanc

ial a

sset

s bu

t will

be in

clud

ed

in a

sses

sing

the

SPPI

con

ditio

n.

Inve

stm

ents

in e

quity

inst

rum

ents

are

alw

ays

mea

sure

d at

fair

valu

e.

How

ever

, man

agem

ent c

an

mak

e an

irre

voca

ble

elec

tion

to p

rese

nt ch

ange

s in

fair

valu

e in

oth

er co

mpr

ehen

sive

inco

me,

pro

vided

th

e in

stru

men

t is

not h

eld

for t

radi

ng. I

f the

equ

ity in

stru

men

t is

held

for t

radi

ng, c

hang

es in

fair

valu

e ar

e pr

esen

ted

in p

rofit

or l

oss.

Mos

t of t

he r

equi

rem

ents

in IA

S 39

for

clas

sific

atio

n an

d m

easu

rem

ent o

f fin

anci

al li

abilit

ies

were

ca

rried

forw

ard

unch

ange

d to

IFR

S 9.

The

key

cha

nge

is th

at a

n en

tity

will

be re

quire

d to

pre

sent

the

effe

cts

of c

hang

es in

own

cre

dit r

isk o

f fin

anci

al lia

biliti

es d

esig

nate

d at

fair

valu

e th

roug

h pr

ofit

or lo

ss

in o

ther

com

preh

ensi

ve in

com

e.

IFR

S 9

intro

duce

s a

new

mod

el fo

r the

reco

gnitio

n of

impa

irmen

t los

ses

– th

e ex

pect

ed c

redi

t los

ses

(EC

L) m

odel

. Th

ere

is a

‘thr

ee s

tage

’ app

roac

h w

hich

is b

ased

on

the

chan

ge in

cre

dit

qual

ity o

f fin

anci

al a

sset

s sin

ce in

itial r

ecog

nitio

n. In

pra

ctic

e, th

e ne

w ru

les

mea

n th

at e

ntitie

s wi

ll hav

e to

reco

rd

an im

med

iate

loss

equ

al to

the

12-m

onth

ECL

on

initi

al r

ecog

nitio

n of

fina

ncia

l ass

ets

that

are

not

cr

edit

impa

ired

(or l

ifetim

e EC

L fo

r tra

de re

ceiva

bles

). W

here

ther

e ha

s be

en a

sig

nific

ant i

ncre

ase

in

cred

it ris

k, im

pairm

ent i

s m

easu

red

usin

g life

time

ECL

rath

er th

an 1

2-m

onth

ECL

. The

mod

el in

clud

es

oper

atio

nal s

impl

ificat

ions

for l

ease

and

trad

e re

ceiva

bles

. H

edge

ac

coun

ting

requ

irem

ents

we

re

amen

ded

to

alig

n ac

coun

ting

mor

e clo

sely

with

ris

k m

anag

emen

t. Th

e st

anda

rd p

rovid

es e

ntitie

s wi

th a

n ac

coun

ting

polic

y ch

oice

bet

ween

app

lying

the

hedg

e ac

coun

ting

requ

irem

ents

of I

FRS

9 an

d co

ntin

uing

to a

pply

IAS

39 to

all

hedg

es b

ecau

se th

e st

anda

rd c

urre

ntly

does

not

add

ress

acc

ount

ing

for m

acro

hed

ging

. IF

RS

15, R

even

ue fr

om C

ontra

cts

with

Cus

tom

ers

(effe

ctiv

e fo

r ann

ual p

erio

ds b

egin

ning

on

or a

fter

1 Ja

nuar

y 20

18).

The

new

stan

dard

intro

duce

s th

e co

re p

rinci

ple

that

reve

nue

mus

t be

reco

gnise

d wh

en th

e go

ods

or s

ervic

es a

re tr

ansf

erre

d to

the

cust

omer

, at t

he tr

ansa

ctio

n pr

ice. A

ny b

undl

ed

good

s or

ser

vices

that

are

dist

inct

mus

t be

sepa

rate

ly re

cogn

ised,

and

any

disc

ount

s or

reba

tes

on

the

cont

ract

pric

e m

ust g

ener

ally

be

allo

cate

d to

the

sepa

rate

ele

men

ts. W

hen

the

cons

ider

atio

n va

ries

for a

ny re

ason

, min

imum

am

ount

s m

ust b

e re

cogn

ised

if th

ey a

re n

ot a

t sig

nific

ant r

isk o

f rev

ersa

l. C

osts

incu

rred

to se

cure

con

tract

s with

cus

tom

ers

have

to b

e ca

pita

lised

and

am

ortis

ed o

ver t

he p

erio

d wh

en th

e be

nefit

s of

the

cont

ract

are

con

sum

ed.

Sale

or C

ontri

butio

n of

Ass

ets

betw

een

an In

vest

or a

nd it

s As

soci

ate

or J

oint

Ven

ture

- A

men

dmen

ts

to IF

RS

10 a

nd IA

S 28

(effe

ctive

dat

e to

be

dete

rmin

ed b

y th

e IA

SB; n

ot y

et e

ndor

sed

by th

e EU

). Th

ese

amen

dmen

ts a

ddre

ss a

n in

cons

isten

cy b

etwe

en th

e re

quire

men

ts in

IFRS

10

and

thos

e in

IAS

28 in

dea

ling

with

the

sale

or c

ontri

butio

n of

ass

ets

betw

een

an in

vest

or a

nd it

s as

soci

ate

or jo

int

vent

ure.

The

mai

n co

nseq

uenc

e of

the

amen

dmen

ts is

that

a fu

ll ga

in o

r los

s is

reco

gnise

d wh

en a

tra

nsac

tion

invo

lves

a bu

sine

ss. A

par

tial g

ain

or lo

ss is

reco

gnise

d wh

en a

tran

sact

ion

invo

lves

asse

ts

that

do

not c

onst

itute

a b

usin

ess,

eve

n if

thes

e as

sets

are

hel

d by

a s

ubsi

diar

y an

d th

e sh

ares

of t

he

subs

idia

ry a

re tr

ansf

erre

d du

ring

the

trans

actio

n.

IFR

S 16

, Lea

ses

(effe

ctiv

e fo

r ann

ual p

erio

ds b

egin

ning

on

or a

fter 1

Jan

uary

201

9; n

ot y

et e

ndor

sed

by th

e EU

). Th

e ne

w st

anda

rd s

ets

out t

he p

rinci

ples

for t

he re

cogn

ition,

mea

sure

men

t, pr

esen

tatio

n an

d di

sclo

sure

of l

ease

s. A

ll le

ases

resu

lt in

the

less

ee o

btai

ning

the

right

to u

se a

n as

set a

t the

sta

rt of

the

leas

e an

d, if

leas

e pa

ymen

ts a

re m

ade

over

tim

e, a

lso o

btai

ning

fina

ncin

g. A

ccor

ding

ly, IF

RS

16 e

limin

ates

the

class

ificat

ion

of le

ases

as

eith

er o

pera

ting

leas

es o

r fin

ance

leas

es a

s is

requ

ired

by

IAS

17 a

nd,

inst

ead,

int

rodu

ces

a si

ngle

les

see

acco

untin

g m

odel

. Le

ssee

s wi

ll be

req

uire

d to

re

cogn

ise:

(a)

ass

ets

and

liabi

litie

s fo

r al

l lea

ses

with

a te

rm o

f mor

e th

an 1

2 m

onth

s, u

nles

s th

e un

derly

ing

asse

t is

of lo

w va

lue;

and

(b) d

epre

ciat

ion

of le

ase

asse

ts s

epar

atel

y fro

m in

tere

st o

n le

ase

liabi

litie

s in

the

inc

ome

stat

emen

t. IF

RS

16 s

ubst

antia

lly c

arrie

s fo

rwar

d th

e le

ssor

acc

ount

ing

requ

irem

ents

in IA

S 17

. Acc

ordi

ngly,

a le

ssor

con

tinue

s to

cla

ssify

its

leas

es a

s op

erat

ing

leas

es o

r fin

ance

leas

es, a

nd to

acc

ount

for t

hose

two

type

s of

leas

es d

iffer

ently

. R

ecog

nitio

n of

Def

erre

d Ta

x As

sets

for

Unr

ealiz

ed L

osse

s -

Amen

dmen

ts to

IAS

12 (

effe

ctiv

e fo

r an

nual

per

iods

beg

inni

ng o

n or

afte

r 1 J

anua

ry 2

017;

not

yet

ado

pted

by

the

EU).

The

amen

dmen

t ha

s cl

arifie

d th

e re

quire

men

ts o

n re

cogn

ition

of d

efer

red

tax

asse

ts fo

r un

real

ized

loss

es o

n de

bt

inst

rum

ents

. The

ent

ity w

ill ha

ve to

reco

gnise

def

erre

d ta

x as

set f

or u

nrea

lized

loss

es th

at a

rise

as a

re

sult

of d

iscou

ntin

g ca

sh fl

ows

of d

ebt i

nstru

men

ts a

t mar

ket i

nter

est r

ates

, eve

n if

it ex

pect

s to

hol

d th

e in

stru

men

t to

mat

urity

and

no

tax

will

be p

ayab

le u

pon

colle

ctin

g th

e pr

inci

pal a

mou

nt.

The

econ

omic

bene

fit e

mbo

died

in th

e de

ferre

d ta

x as

set a

rises

from

the

abilit

y of

the

hold

er o

f the

deb

t in

stru

men

t to

achi

eve

futu

re g

ains

(unw

indi

ng o

f the

effe

cts

of d

iscou

ntin

g) w

ithou

t pay

ing

taxe

s on

th

ose

gain

s.

„Dis

clos

ure

Initia

tive

- Am

endm

ents

to IA

S 7

(effe

ctive

for

annu

al p

erio

ds b

egin

ning

on

or a

fter

1 Ja

nuar

y 20

17;

not

yet

adop

ted

by t

he E

U).

The

amen

ded

IAS

7 wi

ll re

quire

dis

clos

ure

of a

re

conc

iliatio

n of

mov

emen

ts in

liab

ilitie

s ar

ising

from

fina

ncin

g ac

tivitie

s.

F-29

245496 Olive pp138-imp 27/06/2017 09:22 Page 29

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

122

AN

NU

AL R

EPO

RT 2

016

|

Rev

enue

fro

m C

ontra

cts

with

Cus

tom

ers

- Am

endm

ents

to

IFRS

15

(effe

ctive

for

annu

al p

erio

ds

begi

nnin

g on

or a

fter 1

Jan

uary

201

8; n

ot y

et a

dopt

ed b

y th

e EU

). Th

e am

endm

ents

do

not c

hang

e th

e un

derly

ing

prin

cipl

es o

f the

sta

ndar

d bu

t cla

rify

how

thos

e pr

inci

ples

sho

uld

be a

pplie

d.

The

amen

dmen

ts c

larif

y ho

w to

iden

tify

a pe

rform

ance

obl

igat

ion

(the

prom

ise to

tran

sfer

a g

ood

or a

se

rvic

e to

a c

usto

mer

) in

a co

ntra

ct; h

ow to

det

erm

ine

whet

her a

com

pany

is a

prin

cipa

l (th

e pr

ovid

er

of a

goo

d or

ser

vice)

or a

n ag

ent (

resp

onsi

ble

for a

rrang

ing

for t

he g

ood

or s

ervic

e to

be

prov

ided

); an

d ho

w to

det

erm

ine

whet

her t

he re

venu

e fro

m g

rant

ing

a lic

ense

sho

uld

be re

cogn

ised

at a

poi

nt in

tim

e or

ove

r tim

e. I

n ad

ditio

n to

the

clar

ificat

ions

, the

am

endm

ents

incl

ude

two

addi

tiona

l rel

iefs

to

redu

ce c

ost a

nd c

ompl

exity

for a

com

pany

whe

n it

first

app

lies

the

new

stan

dard

. An

nual

Impr

ovem

ents

to IF

RSs

201

4–20

16 C

ycle

(effe

ctiv

e fo

r ann

ual p

erio

ds b

egin

ning

on

or a

fter 1

Ja

nuar

y 20

17 (c

hang

es to

IFR

S 12

) or 2

018

(cha

nges

to IF

RS 1

and

IAS

28));

not

yet

ado

pted

by

the

EU).

The

impr

ovem

ents

im

pact

thr

ee s

tand

ards

. Th

e am

endm

ents

cla

rify

that

the

disc

losu

re

requ

irem

ents

in IF

RS 1

2, o

ther

than

thos

e in

par

agra

phs

B10–

B16,

app

ly to

an

entit

y's in

tere

sts

in

othe

r ent

ities

that

are

cla

ssifi

ed a

s he

ld fo

r sal

e or

disc

ontin

ued

oper

atio

ns in

acc

orda

nce

with

IFRS

5.

IFR

S 1

was

amen

ded

to d

elet

e so

me

of th

e sh

ort-t

erm

exe

mpt

ions

from

IFR

Ss a

fter t

hose

sho

rt-te

rm e

xem

ptio

ns h

ave

serv

ed th

eir i

nten

ded

purp

ose.

The

am

endm

ents

to IA

S 28

cla

rify

that

ven

ture

ca

pita

l or

gani

zatio

ns o

r sim

ilar

entit

ies

have

an

inve

stm

ent-b

y- in

vest

men

t ch

oice

for

mea

surin

g in

vest

ees

at fa

ir va

lue.

Add

ition

ally,

the

amen

dmen

t cla

rifie

s th

at if

an in

vest

or th

at is

not

an

inve

stm

ent

entit

y ha

s an

ass

ocia

te o

r joi

nt v

entu

re th

at is

an

inve

stm

ent e

ntity

, the

inve

stor

can

cho

ose

on a

n in

vest

men

t-by-

inve

stm

ent

basis

to

reta

in o

r re

vers

e th

e fa

ir va

lue

mea

sure

men

ts u

sed

by t

hat

inve

stm

ent e

ntity

ass

ocia

te o

r joi

nt v

entu

re w

hen

appl

ying

the

equi

ty m

etho

d.

„Tra

nsfe

rs o

f Inv

estm

ent P

rope

rty -

Amen

dmen

ts to

IAS

40 (e

ffect

ive fo

r ann

ual p

erio

ds b

egin

ning

on

or a

fter 1

Jan

uary

201

8; n

ot y

et a

dopt

ed b

y th

e EU

). Th

e am

endm

ent c

larif

ied

that

to tr

ansf

er to

, or

from

, in

vest

men

t pr

oper

ties

ther

e m

ust

be a

cha

nge

in u

se.

This

chan

ge m

ust

be s

uppo

rted

by

evid

ence

; a c

hang

e in

inte

ntio

n, in

isol

atio

n, is

not

eno

ugh

to s

uppo

rt a

trans

fer.

IFR

IC 2

2 Fo

reig

n C

urre

ncy

Tran

sact

ions

and

Adv

ance

Con

side

ratio

n (e

ffect

ive

for

annu

al p

erio

ds

begi

nnin

g on

or a

fter 1

Jan

uary

201

8; n

ot y

et a

dopt

ed b

y th

e EU

). Th

e in

terp

reta

tion

appl

ies

wher

e an

en

tity

eith

er p

ays

or re

ceive

s co

nsid

erat

ion

in a

dvan

ce fo

r for

eign

cur

renc

y-de

nom

inat

ed c

ontra

cts.

Th

e in

terp

reta

tion

clarif

ies

that

the

dat

e of

tra

nsac

tion,

i.e

. th

e da

te w

hen

the

exch

ange

rat

e is

dete

rmin

ed, i

s th

e da

te o

n wh

ich

the

entit

y in

itial

ly re

cogn

izes

the

non-

mon

etar

y as

set o

r lia

bility

from

ad

vanc

e co

nsid

erat

ion.

How

ever

, th

e en

tity

need

s to

app

ly ju

dgem

ent i

n de

term

inin

g wh

ethe

r th

e pr

epay

men

t is

mon

etar

y or

non

-mon

etar

y as

set o

r lia

bility

bas

ed o

n gu

idan

ce in

IAS

21, I

AS 3

2 an

d th

e C

once

ptua

l Fra

mew

ork.

Th

e G

roup

and

the

Com

pany

are

cur

rent

ly as

sess

ing

the

impa

ct o

f the

new

sta

ndar

ds o

n th

eir f

inan

cial

st

atem

ents

.

2.2

Con

solid

atio

n

Con

solid

atio

n Th

e co

nsol

idat

ed fi

nanc

ial s

tate

men

ts o

f the

Gro

up in

clud

e th

e fin

anci

al s

tate

men

ts o

f the

par

ent

com

pany

Lie

tuvo

s En

ergi

ja U

AB a

nd it

s di

rect

ly an

d in

dire

ctly

cont

rolle

d su

bsid

iarie

s. T

he G

roup

co

ntro

ls an

ent

ity w

hen

the

Gro

up is

exp

osed

to, o

r has

righ

ts to

, var

iabl

e re

turn

s fro

m it

s in

volve

men

t wi

th th

e en

tity

and

has

the

abilit

y to

affe

ct th

ose

retu

rns

thro

ugh

its p

ower

ove

r the

ent

ity.

Con

trol i

s ge

nera

lly o

btai

ned

by h

oldi

ng m

ore

than

one

hal

f of

the

vot

ing

right

s.

Subs

idia

ries

are

fully

cons

olid

ated

from

the

date

on

whic

h co

ntro

l is tr

ansf

erre

d to

the

Gro

up. T

hey

are

deco

nsol

idat

ed fr

om

the

date

that

con

trol c

ease

s.

The

finan

cial

sta

tem

ents

of s

ubsi

diar

ies

have

bee

n pr

epar

ed u

sing

uni

form

acc

ount

ing

polic

ies

and

for

the

sam

e re

porti

ng p

erio

d as

that

cov

ered

by

the

finan

cial

sta

tem

ents

of t

he p

aren

t com

pany

. On

cons

olid

atio

n, a

ll in

ter-c

ompa

ny t

rans

actio

ns,

bala

nces

and

unr

ealiz

ed g

ains

and

/or

loss

es o

n tra

nsac

tions

am

ong

the

Gro

up c

ompa

nies

are

elim

inat

ed.

Non

-con

trollin

g in

tere

st re

pres

ents

a p

art o

f pro

fit o

r los

s an

d ne

t ass

ets

whic

h is

not c

ontro

lled

by th

e G

roup

. Non

-con

trollin

g in

tere

st is

repo

rted

sepa

rate

ly in

the

cons

olid

ated

sta

tem

ent o

f com

preh

ensi

ve

inco

me.

The

sha

re o

f equ

ity a

ttrib

utab

le to

the

non-

cont

rollin

g in

tere

st a

nd to

the

owne

rs o

f the

par

ent

is s

hown

sep

arat

ely

in th

e co

nsol

idat

ed b

alan

ce s

heet

.

Busi

ness

com

bina

tions

Ac

quisi

tion

of s

ubsi

diar

ies

whic

h ar

e no

t par

t of t

he C

ompa

ny's

grou

p ar

e ac

coun

ted

for u

sing

the

acqu

isitio

n m

etho

d. T

he c

onsid

erat

ion

trans

ferre

d is

mea

sure

d as

the

fai

r va

lue

of t

he a

sset

s tra

nsfe

rred,

the

equi

ty in

tere

st is

sued

and

liabi

litie

s in

curre

d or

ass

umed

at t

he d

ate

of e

xcha

nge.

A

ll ac

quis

ition-

rela

ted

cost

s ar

e ex

pens

ed w

hen

incu

rred.

The

acq

uire

r’s a

sset

s ac

quire

d, li

abilit

ies

and

cont

inge

nt li

abilit

ies

mee

ting

reco

gniti

on c

riter

ia l

aid

dow

n in

IFR

S 3

‘Bus

ines

s co

mbi

natio

ns' a

re

iden

tifie

d. T

hey

are

reco

gnise

d at

thei

r fa

ir va

lues

at t

he a

cqui

sitio

n da

te.

Afte

rwar

ds,

decr

ease

/ in

crea

se in

con

tinge

nt c

onsi

dera

tion

is ac

coun

ted

thro

ugh

prof

it (lo

ss).

The

exce

ss o

f the

con

side

ratio

n tra

nsfe

rred,

the

amou

nt o

f any

non

-con

trollin

g in

tere

st in

the

acqu

iree

and

the

acqu

isitio

n-da

te fa

ir va

lue

of a

ny p

revio

us e

quity

inte

rest

in th

e ac

quire

e ov

er th

e fa

ir va

lue

of

the

iden

tifia

ble

net a

sset

s ac

quire

d is

reco

rded

as

good

will.

If t

he to

tal o

f con

side

ratio

n tra

nsfe

rred,

no

n-co

ntro

lling

inte

rest

reco

gnis

ed a

nd p

revio

usly

held

inte

rest

mea

sure

d is

less

than

the

fair

valu

e of

th

e ne

t ass

ets o

f the

subs

idia

ry a

cqui

red

in th

e ca

se o

f a b

arga

in p

urch

ase,

the

diffe

renc

e is

reco

gnise

d di

rect

ly in

pro

fit (l

oss)

.

Non

-con

trollin

g in

tere

st i

n th

e ac

quire

e is

initia

lly m

easu

red

at t

he n

on-c

ontro

lling

inte

rest

’s

prop

ortio

nal s

hare

of t

he fa

ir va

lue

of th

e ne

t ass

ets,

liabi

litie

s an

d co

ntin

gent

liabi

litie

s re

cogn

ised.

Cha

nges

in o

wne

rshi

p in

tere

st in

a s

ubsi

diar

y th

at d

o no

t res

ult i

n ch

ange

s in

con

trol

Tran

sact

ions

with

non

-con

trollin

g in

tere

sts

that

do

not r

esul

t in

a lo

ss o

f con

trol a

re p

rese

nted

with

in

equi

ty,

i.e.

as t

rans

actio

ns w

ith e

quity

own

ers.

The

diff

eren

ce b

etwe

en t

he f

air

valu

e of

the

co

nsid

erat

ion

paid

and

the

rele

vant

sha

re a

cqui

red

of th

e ca

rryin

g va

lue

of n

et a

sset

s of

the

subs

idia

ry

is re

cord

ed a

s eq

uity

. G

ains

or l

osse

s on

dis

posa

ls to

non

-con

trollin

g in

tere

sts

are

also

reco

rded

in

equi

ty.

2.3

Inve

stm

ents

in s

ubsi

diar

ies

(Com

pany

) A

sub

sidi

ary

is a

n en

tity

dire

ctly

or i

ndire

ctly

con

trolle

d by

a p

aren

t com

pany

. In

the

pare

nt c

ompa

ny’s

ba

lanc

e sh

eet

inve

stm

ents

in

dire

ctly

con

trolle

d su

bsid

iarie

s ar

e st

ated

at

acqu

isiti

on c

ost

less

im

pairm

ent l

oss,

whe

re t

he in

vest

men

t’s c

arry

ing

amou

nt in

the

par

ent

com

pany

's b

alan

ce s

heet

ex

ceed

s its

est

imat

ed re

cove

rabl

e am

ount

. Con

tinge

nt c

onsi

dera

tion

is in

clud

ed to

acq

uisit

ion

cost

at

its f

air

valu

e as

at

acqu

isitio

n da

te.

Afte

rwar

ds,

decr

ease

/ in

crea

se in

con

side

ratio

n pa

yabl

e is

acco

unte

d th

roug

h pr

ofit

(loss

) and

trig

ger i

mpa

irmen

t tes

t for

inve

stm

ent i

n th

e su

bsid

iary

.

F-30

245496 Olive pp138-imp 27/06/2017 09:22 Page 30

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

123

AN

NU

AL R

EPO

RT 2

016

|

2.4

Inve

stm

ents

in a

ssoc

iate

s

An a

ssoc

iate

is a

n en

tity

over

whi

ch th

e G

roup

/Com

pany

has

sig

nific

ant i

nflu

ence

. Sig

nific

ant i

nflu

ence

is

the

powe

r to

parti

cipa

te in

the

finan

cial

and

ope

ratin

g po

licy

decis

ions

of t

he in

vest

ee b

ut is

not

co

ntro

l or j

oint

con

trol o

ver t

hose

pol

icie

s.

In t

he C

ompa

ny’s

bal

ance

she

et i

nves

tmen

ts i

n as

soci

ates

are

sta

ted

at a

cqui

sitio

n co

st l

ess

impa

irmen

t los

s, w

here

the

inve

stm

ent’s

car

ryin

g am

ount

in th

e pa

rent

’s b

alan

ce s

heet

exc

eeds

its

estim

ated

reco

vera

ble

amou

nt.

In th

e co

nsol

idat

ed fi

nanc

ial s

tate

men

ts o

f the

Gro

up re

sults

of o

pera

tions

, ass

ets

and

liabi

litie

s of

as

soci

ates

are

acc

ount

ed fo

r usi

ng a

n eq

uity

met

hod,

exc

ept w

hen

the

inve

stm

ent i

s cl

assif

ied

as

held

-for-s

ale

and

it is

rec

ogni

sed

acco

rdin

g to

IFR

S 5

‘Non

-cur

rent

ass

ets

held

for

sal

e an

d di

scon

tinue

d op

erat

ions

’. U

nder

the

equi

ty m

etho

d, o

n in

itial r

ecog

nitio

n th

e in

vest

men

t in

an a

ssoc

iate

is

reco

gnise

d at

cos

t, an

d th

e ca

rryin

g am

ount

is in

crea

sed

or d

ecre

ased

to re

cogn

ise

the

Gro

up’s

sh

are

of th

e pr

ofit

or lo

ss o

f the

ass

ocia

te a

fter

the

date

of a

cqui

sitio

n. T

he G

roup

’s s

hare

of

the

asso

ciat

e pr

ofit

or lo

ss is

rec

ogni

sed

in th

e G

roup

’s p

rofit

or

loss

. D

istri

butio

ns r

ecei

ved

from

an

asso

ciat

e re

duce

the

carry

ing

amou

nt o

f the

ass

ocia

te. A

djus

tmen

ts to

the

carry

ing

amou

nt a

re a

lso

perfo

rmed

for c

hang

es in

the

Gro

up’s

pro

porti

onat

e in

tere

st in

the

asso

ciat

e ar

isin

g fro

m c

hang

es in

th

e as

soci

ate’

s ot

her c

ompr

ehen

sive

inco

me.

A

ny e

xces

s of

the

cost

of a

cqui

sitio

n ov

er th

e fa

ir va

lue

of th

e G

roup

’s s

hare

of n

et id

entif

iabl

e as

sets

, lia

bilit

ies

and

cont

inge

nt li

abilit

ies

of th

e as

soci

ate

at th

e da

te o

f acq

uisi

tion

is re

cogn

ised

as n

otio

nal

good

will.

The

goo

dwill

is in

clud

ed in

the

net

book

am

ount

of t

he in

vest

men

t an

d is

asse

ssed

for

im

pairm

ent

as p

art

of t

he i

nves

tmen

t. A

ny e

xces

s of

the

fai

r va

lue

of t

he G

roup

’s s

hare

of

net

iden

tifia

ble

asse

ts, l

iabi

litie

s an

d co

ntin

gent

liabi

litie

s ov

er th

e co

st o

f acq

uisi

tion,

afte

r rea

sses

smen

t, is

reco

gnis

ed im

med

iate

ly in

the

prof

it (lo

ss).

Whe

re th

e G

roup

com

pany

con

duct

s tra

nsac

tions

with

an

ass

ocia

te o

f the

Gro

up, u

nrea

lized

pro

fits

or lo

sses

are

elim

inat

ed t

o th

e ex

tent

of t

he G

roup

’s

inte

rest

in th

e re

leva

nt e

ntity

.

2.5

Fore

ign

curre

ncy

trans

latio

n (a

) Fun

ctio

nal a

nd p

rese

ntat

ion

curre

ncy

Item

s in

clud

ed in

the

fin

anci

al s

tate

men

ts o

f ea

ch o

f th

e G

roup

’s e

ntiti

es a

re m

easu

red

usin

g th

e cu

rrenc

y of

the

prim

ary

econ

omic

env

ironm

ent i

n wh

ich

the

entit

y op

erat

es (‘

the

func

tiona

l cur

renc

y’).

Th

e co

nsol

idat

ed f

inan

cial

sta

tem

ents

are

pre

sent

ed in

the

eur

os (

EU

R),

whi

ch is

the

Com

pany

’s

func

tiona

l and

pre

sent

atio

n cu

rrenc

y as

from

1 J

anua

ry 2

015.

(b

) Tra

nsac

tions

and

bal

ance

s Fo

reig

n cu

rrenc

y tra

nsac

tions

are

tran

slat

ed in

to th

e fu

nctio

nal c

urre

ncy

usin

g th

e ex

chan

ge r

ates

pr

evai

ling

at th

e da

tes

of th

e tra

nsac

tions

. For

eign

exc

hang

e ga

ins

and

loss

es r

esul

ting

from

the

settl

emen

t of f

orei

gn c

urre

ncy

trans

actio

ns a

nd fr

om th

e tra

nsla

tion

at y

ear-e

nd e

xcha

nge

rate

of

mon

etar

y as

sets

and

liab

ilitie

s de

nom

inat

ed in

fore

ign

curre

ncie

s ar

e re

cogn

ised

in th

e pr

ofit

(loss

).

2.6

Prop

erty

, pla

nt, a

nd e

quip

men

t Pr

oper

ty, p

lant

and

equ

ipm

ent i

s st

ated

at c

ost o

r rev

alue

d am

ount

. Pro

perty

, pla

nt a

nd e

quip

men

t, in

clud

ing

cate

gorie

s of

ass

ets

of th

e H

ydro

Pow

er P

lant

, Pum

ped

Stor

age

Powe

r Pla

nt, s

truct

ures

and

m

achi

nery

of T

herm

al P

ower

Pla

nt (C

ombi

ned

Cyc

le U

nit a

nd R

eser

ve P

ower

Pla

nt),

gas

dist

ribut

ion

pipe

lines

, ga

s te

chno

logi

cal e

quip

men

t, wi

nd p

ower

pla

nts,

as

well

as I

T an

d te

leco

mm

unica

tion

equi

pmen

t, is

acco

unte

d fo

r at c

ost l

ess

accu

mul

ated

dep

reci

atio

n an

d im

pairm

ent.

All o

ther

pro

perty

, pl

ant

and

equi

pmen

t ar

e sh

own

at r

eval

uate

d am

ount

s, b

ased

on

perio

dic

valu

atio

ns b

y ex

tern

al

inde

pend

ent v

alue

rs o

r by

the

Gro

up's

man

agem

ent,

less

sub

sequ

ent a

ccum

ulat

ed d

epre

ciat

ion

and

subs

eque

nt a

ccum

ulat

ed im

pairm

ent l

osse

s. R

eval

uatio

ns a

re p

erfo

rmed

with

suf

ficie

nt re

gula

rity

to

ensu

re th

at th

e ca

rryin

g am

ount

doe

s no

t diff

er m

ater

ially

from

the

fair

valu

e at

the

end

of th

e re

porti

ng

perio

d. A

ny a

ccum

ulat

ed d

epre

ciatio

n an

d im

pairm

ent l

osse

s at

the

date

of r

eval

uatio

n ar

e el

imin

ated

ag

ains

t gro

ss c

arry

ing

amou

nt o

f the

ass

et a

nd n

et a

mou

nt is

rest

ated

to th

e re

valu

ed a

mou

nt o

f the

as

sets

. C

ost i

nclu

des

repl

acem

ent c

osts

of c

ompo

nent

s of

pro

perty

, pla

nt a

nd e

quip

men

t whe

n in

curre

d an

d wh

en th

ese

cost

s m

eet t

he re

cogn

ition

crit

eria

of p

rope

rty, p

lant

and

equ

ipm

ent.

In

crea

ses

in t

he c

arry

ing

amou

nt a

risin

g on

rev

alua

tion

of p

rope

rty,

plan

t an

d eq

uipm

ent

are

reco

gnis

ed

in

othe

r co

mpr

ehen

sive

in

com

e an

d ac

cum

ulat

ed

to

the

reva

luat

ion

rese

rve

in

shar

ehol

ders

’ equ

ity. H

owev

er, t

he in

crea

se is

reco

gnise

d in

pro

fit o

r los

s to

the

exte

nt th

at it

reve

rses

a

reva

luat

ion

decr

ease

of t

he s

ame

asse

t pre

viou

sly

reco

gnise

d in

pro

fit o

r los

s. D

ecre

ases

in th

e ca

rryin

g am

ount

of a

n as

set a

risin

g on

reva

luat

ion

are

reco

gnise

d in

pro

fit o

r los

s; d

ecre

ases

that

offs

et p

revio

us

incr

ease

s of

the

sam

e as

set a

re re

cogn

ised

in o

ther

com

preh

ensi

ve in

com

e an

d ch

arge

d ag

ains

t the

re

valu

atio

n re

serv

e. E

ach

year

the

diffe

renc

e be

twee

n de

prec

iatio

n ba

sed

on th

e re

valu

ed a

mou

nt o

f th

e as

set

(whe

n th

e ca

rryin

g am

ount

incr

ease

s af

ter

reva

luat

ion)

is c

harg

ed to

pro

fit o

r lo

ss a

nd

depr

ecia

tion

base

d on

the

asse

t’s o

rigin

al a

cqui

sitio

n co

st is

tran

sfer

red

from

reva

luat

ion

rese

rve

to

reta

ined

ear

ning

s, n

et o

f def

erre

d in

com

e ta

x.

Dep

reci

atio

n of

pro

perty

, pla

nt a

nd e

quip

men

t is

calc

ulat

ed u

sing

the

stra

ight

-line

met

hod

to a

lloca

te

the

acqu

isitio

n co

st/re

valu

ed a

mou

nts

to th

eir r

esid

ual v

alue

s ov

er th

eir e

stim

ated

use

ful li

ves

(num

ber

of y

ears

), as

follo

ws:

Bu

ild

ing

s

8-75

S

tru

ctu

res a

nd

mach

inery

- el

ectri

city

and

com

mun

icatio

ns e

quip

men

t 20

-25

- el

ectri

city

dist

ribut

ion

equi

pmen

t 15

-45

- el

ectri

city

equ

ipm

ent

15-3

5 -

othe

r equ

ipm

ent

5-50

W

ind

po

wer

pla

nts

20

A

sse

ts o

f H

yd

ro P

ow

er

Pla

nt,

Pu

mp

ed

Sto

rag

e P

ow

er

Pla

nt,

Reserv

e

Po

wer

Pla

nt

an

d C

om

bin

ed

Cyc

le U

nit

:

Asse

ts o

f Hyd

ro P

ower

Pla

nt a

nd P

umpe

d St

orag

e Pl

ant:

-

hydr

otec

hnic

al w

ater

way

stru

ctur

es a

nd e

quip

men

t 75

-

pres

sure

pip

elin

es

50

- hy

drot

echn

ical

turb

ines

25

-40

- ot

her e

quip

men

t 8-

15

Asse

ts o

f Res

erve

Pow

er P

lant

:

- st

ruct

ures

and

infra

stru

ctur

e 10

-70

- th

erm

al a

nd e

lect

ricity

equ

ipm

ent

10-6

0 -

mea

surin

g de

vices

and

equ

ipm

ent

5-30

-

othe

r equ

ipm

ent

8-15

As

sets

of C

ombi

ned

Cycl

e Un

it:

-

stru

ctur

es a

nd in

frast

ruct

ure

20-5

0 -

elec

trici

ty li

nes

20-4

0 -

elec

trici

ty g

ener

atio

n eq

uipm

ent

20-5

0 G

as d

istr

ibu

tio

n p

ipelin

es a

nd

th

eir

eq

uip

men

t 18

- 55

M

oto

r veh

icle

s

2-35

IT

an

d t

ele

co

mm

un

icati

on

eq

uip

men

t 3-

10

Oth

er

pro

pert

y,

pla

nt

an

d e

qu

ipm

en

t:

-

tool

s, o

ther

pro

perty

, pla

nt a

nd e

quip

men

t 4-

10

F-31

245496 Olive pp138-imp 27/06/2017 09:22 Page 31

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

124

AN

NU

AL R

EPO

RT 2

016

|

Prop

erty

, pla

nt a

nd e

quip

men

t inc

lude

spa

re p

arts

, spa

re e

quip

men

t and

m

aint

enan

ce e

quip

men

t wh

en th

ey m

eet t

he d

efin

ition

of p

rope

rty, p

lant

and

equ

ipm

ent.

Th

e as

sets

’ res

idua

l val

ues

and

usef

ul li

ves

are

revi

ewed

, and

adj

uste

d if

appr

opria

te.

Borro

wing

cos

ts d

irect

ly at

tribu

tabl

e to

the

acq

uisit

ion,

con

stru

ctio

n or

pro

duct

ion

of a

sset

s th

at

nece

ssar

ily t

ake

a su

bsta

ntia

l tim

e (m

ore

than

one

yea

r) to

get

rea

dy f

or i

nten

ded

use

or s

ale

(qua

lifyin

g as

sets

) are

cap

italis

ed a

s pa

rt of

the

cost

s of

thos

e as

sets

(Not

e 2.

17).

W

hen

prop

erty

is re

tired

or o

ther

wise

disp

osed

of,

the

cost

and

rela

ted

accu

mul

ated

dep

reci

atio

n ar

e de

reco

gnize

d an

d an

y re

late

d ga

ins

or lo

sses

are

incl

uded

in p

rofit

or l

oss.

Gai

ns o

r los

ses

on d

ispos

al

of p

rope

rty, p

lant

and

equ

ipm

ent a

re d

eter

min

ed a

s pr

ocee

ds re

ceive

d on

disp

osal

less

the

book

val

ue

of a

sset

s di

spos

ed.

Whe

n re

valu

ed a

sset

s ar

e di

spos

ed, t

he c

orre

spon

ding

por

tion

of re

valu

atio

n re

serv

e is

tran

sfer

red

to re

tain

ed e

arni

ngs

(def

icit).

S

ubse

quen

t re

pair

cost

s ar

e in

clud

ed in

the

ass

et’s

car

ryin

g am

ount

, on

ly w

hen

it is

pro

babl

e th

at

futu

re e

cono

mic

bene

fits

asso

ciat

ed w

ith th

ese

cost

s wi

ll flo

w to

the

Gro

up a

nd th

e C

ompa

ny a

nd th

e co

sts

can

be m

easu

red

relia

bly.

The

car

ryin

g am

ount

of t

he re

plac

ed p

art i

s de

reco

gnize

d. A

ll ot

her

repa

ir an

d m

aint

enan

ce c

osts

are

reco

gnis

ed a

s ex

pens

es in

pro

fit o

r los

s du

ring

the

finan

cial p

erio

d in

whi

ch th

ey a

re in

curre

d.

Con

stru

ctio

n in

pro

gres

s is

trans

ferre

d to

app

ropr

iate

cat

egor

ies

of p

rope

rty, p

lant

and

equ

ipm

ent

when

it is

com

plet

ed a

nd re

ady

for i

ts in

tend

ed u

se.

2.7

Inta

ngib

le a

sset

s

(a) P

aten

ts a

nd li

cens

es

Pate

nts

and

licen

ses

are

stat

ed a

t cos

t. Tr

adem

arks

and

lice

nses

acq

uire

d in

bus

ines

s co

mbi

natio

n ar

e re

cogn

ized

at fa

ir va

lue

at th

e da

te o

f acq

uisit

ion.

Tra

dem

arks

and

lice

nses

are

acc

ount

ed fo

r at

cost

less

acc

umul

ated

am

ortis

atio

n. A

mor

tisat

ion

is c

alcu

late

d us

ing

a st

raig

ht-li

ne b

asis

ove

r th

e es

timat

ed u

sefu

l life

of 3

to 5

yea

rs o

r a s

peci

fic v

alid

ity te

rm o

f a li

cens

e an

d/or

pat

ent,

if an

y. U

sefu

l lif

e is

revie

wed

on y

ear-b

y-ye

ar b

asis

. Fo

r the

Lic

ense

acq

uire

d in

bus

ines

s co

mbi

natio

n (L

icen

se to

pro

duce

ele

ctric

ity w

ith in

cent

ive

rate

), us

eful

life

is d

eter

min

ed to

be

11 y

ears

. (b

) Com

pute

r sof

twar

e Ac

quire

d co

mpu

ter s

oftw

are

licen

ses

are

capi

talis

ed o

n th

e ba

sis o

f the

cos

ts in

curre

d to

acq

uire

and

br

ing

to u

se th

e sp

ecific

sof

twar

e. T

hese

cos

ts a

re a

mor

tised

ove

r the

ir es

timat

ed u

sefu

l liv

es (2

to 4

ye

ars)

. (c

) Em

issio

n al

low

ance

s Fo

r det

aile

d de

scrip

tion

of a

ccou

ntin

g po

licy

for e

mis

sion

allo

wanc

es s

ee N

ote

2.22

. (d

) Oth

er in

tang

ible

ass

ets

Inta

ngib

le a

sset

s ex

pect

ed to

pro

vide

econ

omic

ben

efits

in fu

ture

per

iods

are

val

ued

at a

cqui

sitio

n co

st

less

su

bseq

uent

ac

cum

ulat

ed

amor

tisat

ion

and

any

accu

mul

ated

im

pairm

ent

loss

es.

Amor

tisat

ion

is ca

lcula

ted

on th

e st

raig

ht-li

ne b

asis

over

the

estim

ated

eco

nom

ic u

sefu

l life

of 3

to 4

ye

ars.

2.8

Impa

irmen

t of n

on-fi

nanc

ial a

sset

s At

eac

h re

porti

ng d

ate,

the

Gro

up/C

ompa

ny r

evie

ws t

he b

ook

valu

es o

f its

pro

perty

, pl

ant

and

equi

pmen

t and

inta

ngib

le a

sset

s to

dete

rmin

e wh

ethe

r the

re a

re a

ny in

dica

tions

that

thos

e as

sets

hav

e su

ffere

d an

impa

irmen

t los

s. If

any

suc

h in

dica

tion

exis

ts, t

he r

ecov

erab

le a

mou

nt o

f the

ass

et is

estim

ated

in o

rder

to d

eter

min

e th

e ex

tent

of t

he im

pairm

ent l

oss

(if a

ny).

Whe

re it

is im

poss

ible

to

estim

ate

the

reco

vera

ble

amou

nt o

f an

indi

vidua

l ass

et, t

he re

cove

rabl

e am

ount

of t

he c

ash-

gene

ratin

g un

it to

whi

ch th

e as

set b

elon

gs is

est

imat

ed.

Whe

re a

reas

onab

le a

nd c

onsis

tent

bas

is o

f allo

catio

n ca

n be

iden

tifie

d, a

sset

s ar

e al

so a

lloca

ted

to in

divid

ual c

ash-

gene

ratin

g un

its, o

ther

wise

they

are

al

loca

ted

to t

he s

mal

lest

gro

ups

of c

ash-

gene

ratin

g un

its f

or w

hich

a r

easo

nabl

e an

d co

nsist

ent

allo

catio

n ba

sis c

an b

e id

entif

ied.

In

tang

ible

ass

ets

with

inde

finite

use

ful l

ives

and

inta

ngib

le a

sset

s no

t yet

ava

ilabl

e fo

r use

are

test

ed

for

impa

irmen

t at e

ach

repo

rting

dat

e, a

nd w

hene

ver

ther

e is

an in

dica

tion

that

the

asse

t may

be

impa

ired.

Th

e re

cove

rabl

e am

ount

is th

e hi

gher

of t

he a

sset

’s fa

ir va

lue

less

cos

ts o

f disp

osal

and

val

ue in

use

. In

ass

essi

ng v

alue

in u

se, t

he e

xpec

ted

futu

re c

ash

flows

are

disc

ount

ed to

thei

r pre

sent

val

ue u

sing

the

disc

ount

rate

that

refle

cts

curre

nt m

arke

t ass

essm

ents

of t

he ti

me

valu

e of

mon

ey a

nd th

e ris

ks

spec

ific to

the

asse

t for

whi

ch th

e es

timat

es o

f fut

ure

cash

flow

s ha

ve n

ot b

een

adju

sted

. If

the

reco

vera

ble

amou

nt o

f an

asse

t (or

cas

h-ge

nera

ting

unit)

is e

stim

ated

to b

e le

ss th

an it

s ca

rryin

g am

ount

, the

car

ryin

g am

ount

of t

he a

sset

(cas

h-ge

nera

ting

unit)

is re

duce

d to

its

reco

vera

ble

amou

nt.

An im

pairm

ent l

oss

is re

cogn

ised

imm

edia

tely

in p

rofit

of l

oss.

W

here

an

impa

irmen

t los

s su

bseq

uent

ly re

vers

es, t

he c

arry

ing

amou

nt o

f the

ass

et (c

ash-

gene

ratin

g un

it) is

incr

ease

d to

the

revis

ed e

stim

ate

of it

s re

cove

rabl

e am

ount

, but

so

that

the

incr

ease

d ca

rryin

g am

ount

doe

s no

t exc

eed

the

carry

ing

amou

nt th

at w

ould

hav

e be

en d

eter

min

ed h

ad n

o im

pairm

ent

loss

bee

n re

cogn

ised

for t

he a

sset

(cas

h-ge

nera

ting

unit)

in p

rior y

ears

. A re

vers

al o

f an

impa

irmen

t lo

ss is

reco

gnis

ed im

med

iate

ly in

pro

fit o

r los

s.

2.9

Inve

stm

ent p

rope

rty

Inve

stm

ent p

rope

rty, w

hich

con

sist

s of

the

Gro

up’s

bui

ldin

gs a

nd s

truct

ures

, is

held

to e

arn

rent

als

or

for

capi

tal

appr

ecia

tion.

In

vest

men

t pr

oper

ty

is re

cogn

ised

initi

ally

at

acqu

isitio

n co

st,

and

subs

eque

ntly

at fa

ir va

lue

whic

h is

dete

rmin

ed b

y in

depe

nden

t pro

perly

qua

lifie

d pr

oper

ty v

alue

rs a

nd

base

d on

rec

ent

expe

rienc

e in

val

uatio

n of

ass

ets

of s

imila

r na

ture

. I

nves

tmen

t pr

oper

ty is

not

de

prec

iate

d, a

nd g

ain

or lo

ss o

n ch

ange

in th

e fa

ir va

lue

of in

vest

men

t pro

perty

is re

cogn

ised

in p

rofit

or

loss

for t

he re

porti

ng p

erio

d.

Tran

sfer

s to

and

from

inve

stm

ent p

rope

rty a

re m

ade

only

when

ther

e is

an

evid

ence

of c

hang

e in

the

purp

ose

of u

se o

f as

sets

. C

erta

in im

mov

able

pro

perty

may

be

occu

pied

by

the

Gro

up,

with

the

re

mai

nder

bei

ng h

eld

for

rent

al y

ield

s or

for

cap

ital a

ppre

ciatio

n.

If pa

rt of

imm

ovab

le p

rope

rty

occu

pied

by

the

Gro

up c

an b

e so

ld s

epar

atel

y, th

e G

roup

acc

ount

s fo

r suc

h pr

oper

ty s

epar

atel

y. T

he

porti

on th

at is

own

er-o

ccup

ied

is ac

coun

ted

for

unde

r IA

S 16

, and

the

porti

on th

at is

hel

d to

ear

n re

ntal

s is

acco

unte

d fo

r und

er IA

S 40

.

2.10

N

on-c

urre

nt a

sset

s he

ld fo

r sal

e N

on-c

urre

nt a

sset

s he

ld fo

r sal

e ar

e st

ated

at t

he lo

wer o

f the

car

ryin

g am

ount

and

fair

valu

e le

ss c

osts

of

dis

posa

l if

the

carry

ing

amou

nt is

rec

over

ed p

rinci

pally

thr

ough

a s

ale

trans

actio

n ra

ther

tha

n th

roug

h a

cont

inui

ng u

se.

2.11

Fi

nanc

ial a

sset

s Th

e G

roup

/Com

pany

cla

ssifie

s its

fina

ncia

l ass

ets

into

the

follo

wing

cat

egor

ies:

fina

ncia

l ass

ets

at fa

ir va

lue

thro

ugh

prof

it or

loss

, ava

ilabl

e-fo

r-sal

e fin

ancia

l ass

ets,

loan

s gr

ante

d an

d re

ceiva

bles

. Th

e cl

assif

icatio

n of

fin

anci

al a

sset

s is

bas

ed o

n th

e pu

rpos

e of

fin

anci

al a

sset

s ac

quire

d, t

he

F-32

245496 Olive pp138-imp 27/06/2017 09:22 Page 32

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

125

AN

NU

AL R

EPO

RT 2

016

|

man

agem

ent’s

inte

ntio

ns a

nd w

heth

er th

e in

vest

men

ts a

re q

uote

d in

act

ive

mar

ket.

The

man

agem

ent

dete

rmin

es th

e cl

assi

ficat

ion

of fi

nanc

ial a

sset

s at

initia

l rec

ogni

tion.

R

egul

ar p

urch

ases

and

sal

es o

f fin

anci

al a

sset

s ar

e re

cogn

ised

on th

e tra

de-d

ate

– th

e da

te o

n wh

ich

the

Gro

up/C

ompa

ny c

omm

its to

pur

chas

e or

sel

l the

ass

et. F

inan

cial

ass

ets

are

initia

lly re

cogn

ised

at

fair

valu

e, p

lus

dire

ctly

attri

buta

ble

trans

actio

n co

sts

for i

nves

tmen

ts n

ot c

arrie

d at

fair

valu

e th

roug

h pr

ofit

or lo

ss.

The

subs

eque

nt m

easu

rem

ent o

f fin

anci

al a

sset

s de

pend

s on

thei

r cla

ssific

atio

n as

follo

ws:

Fina

ncia

l ass

ets

at fa

ir va

lue

thro

ugh

prof

it or

loss

Th

e G

roup

’s f

inan

cial

ass

ets

mea

sure

d at

fai

r va

lue

thro

ugh

prof

it or

loss

incl

udes

the

der

ivat

ive

finan

cial

inst

rum

ents

onl

y (s

ee N

ote

2.12

).

Avai

labl

e-fo

r-sal

e fin

ancia

l ass

ets

Avai

labl

e-fo

r-sal

e fin

ancia

l ass

ets

are

thos

e no

n-de

rivat

ive fi

nanc

ial a

sset

s th

at a

re d

esig

nate

d as

av

aila

ble

for

sale

or

are

not

clas

sifie

d as

loan

s an

d re

ceiva

bles

, he

ld-to

-mat

urity

inve

stm

ents

or

finan

cial

ass

ets

at f

air

valu

e th

roug

h pr

ofit

or l

oss.

Man

agem

ent

dete

rmin

es t

he a

ppro

pria

te

clas

sifica

tion

of it

s in

vest

men

ts a

t the

tim

e of

the

purc

hase

. Av

aila

ble-

for-s

ale

secu

ritie

s ar

e m

easu

red

at fa

ir va

lue

base

d on

quo

ted

bid

price

s or

am

ount

s de

rived

fro

m d

iscou

nted

cas

h flo

w m

odel

s. U

nrea

lized

gai

ns a

nd lo

sses

aris

ing

from

cha

nges

in th

e fa

ir va

lue

of fi

nanc

ial a

sset

s cla

ssifie

d as

ava

ilabl

e-fo

r-sal

e ar

e re

cogn

ised

thro

ugh

othe

r com

preh

ensiv

e in

com

e ex

cept

for i

mpa

irmen

t los

ses

and

fore

ign

exch

ange

gai

ns o

r los

ses.

Whe

n su

ch fi

nanc

ial a

sset

s ar

e de

reco

gnize

d th

e cu

mul

ativ

e re

valu

atio

n ga

in o

r los

s pr

evio

usly

reco

gnis

ed in

oth

er c

ompr

ehen

sive

in

com

e is

recl

assif

ied

to p

rofit

or l

oss.

How

ever

, int

eres

t inc

ome

on s

uch

finan

cial

ass

ets

calc

ulat

ed

usin

g th

e ef

fect

ive in

tere

st ra

te is

reco

gnis

ed a

s in

com

e of

the

repo

rting

per

iod.

C

ontin

gent

con

side

ratio

n wh

ich

is du

e to

the

Gro

up /

Com

pany

fro

m d

ispos

als

of s

ubsid

iarie

s is

clas

sifie

d as

ava

ilabl

e-fo

r-sal

e fin

anci

al a

sset

s.

Loan

s an

d re

ceiv

able

s Lo

ans

and

rece

ivabl

es a

re n

on-d

eriva

tive

finan

cial

ass

ets

with

fixe

d or

det

erm

inab

le p

aym

ents

that

ar

e no

t quo

ted

in a

n ac

tive

mar

ket.

They

are

incl

uded

in c

urre

nt a

sset

s, e

xcep

t for

mat

uriti

es g

reat

er

than

12

mon

ths

afte

r the

dat

e of

the

prep

arat

ion

of th

e st

atem

ent o

f fin

anci

al p

ositio

n, in

whi

ch c

ase

they

are

cla

ssifie

d as

non

-cur

rent

ass

ets.

Lo

ans

and

rece

ivabl

es a

re i

nitia

lly r

ecog

nise

d at

acq

uisi

tion

cost

(fa

ir va

lue

of c

onsi

dera

tion

trans

ferre

d) a

nd s

ubse

quen

tly c

arrie

d at

am

ortis

ed c

ost u

sing

the

effe

ctive

inte

rest

rate

met

hod.

Gai

ns

and

loss

es a

re re

cogn

ised

in p

rofit

or l

oss

when

thes

e as

sets

are

der

ecog

nize

d, im

paire

d or

am

ortis

ed.

Trad

e re

ceiva

bles

are

reco

gnise

d in

itial

ly at

fair

valu

e an

d su

bseq

uent

ly m

easu

red

at a

mor

tised

cos

t us

ing

the

effe

ctiv

e in

tere

st m

etho

d, le

ss p

rovis

ion

for i

mpa

irmen

t.

Impa

irmen

t of f

inan

cial

ass

ets

At e

ach

repo

rting

dat

e th

e G

roup

and

the

Com

pany

ass

ess

whet

her t

here

is a

n in

dica

tion

that

fina

ncia

l as

sets

may

be

impa

ired.

A fi

nanc

ial a

sset

is d

eem

ed to

be

impa

ired

if th

ere

is ob

ject

ive e

viden

ce o

f im

pairm

ent a

s a

resu

lt of

one

or m

ore

even

ts th

at h

as o

ccur

red

afte

r the

initia

l rec

ogni

tion

of th

e as

set

and

that

loss

eve

nt h

as a

n im

pact

on

the

estim

ated

futu

re c

ash

flows

of t

he fi

nanc

ial a

sset

s. E

viden

ce

of im

pairm

ent m

ay in

clud

e in

dica

tions

that

the

debt

ors

or a

gro

up o

f deb

tors

is e

xper

ienc

ing

sign

ifica

nt

finan

cial

diff

iculty

, def

ault

or d

elin

quen

cy in

inte

rest

or p

rinci

pal p

aym

ents

, the

pro

babi

lity

that

they

will

ente

r ban

krup

tcy

or o

ther

fina

ncia

l reo

rgan

isat

ion

and

wher

e ob

serv

able

dat

a in

dica

te th

at th

ere

is a

mea

sura

ble

decr

ease

in th

e es

timat

ed fu

ture

cas

h flo

ws, s

uch

as c

hang

es in

arre

ars

or e

cono

mic

cond

ition

s th

at c

orre

late

with

def

aults

. For

fina

ncia

l ass

ets

carri

ed a

t am

ortis

ed c

ost,

the

amou

nt o

f the

im

pairm

ent l

oss

is m

easu

red

as th

e di

ffere

nce

betw

een

the

asse

t’s c

arry

ing

amou

nt a

nd th

e pr

esen

t va

lue

of e

xpec

ted

futu

re c

ash

flows

, est

imat

ed u

sing

the

orig

inal

effe

ctiv

e in

tere

st ra

te.

The

carry

ing

amou

nt o

f the

fina

ncia

l ass

et is

dire

ctly

redu

ced

by th

e am

ount

of e

stim

ated

impa

irmen

t lo

ss,

exce

pt f

or t

rade

rec

eiva

bles

, fo

r wh

ich

impa

irmen

t is

reco

rded

thr

ough

allo

wanc

e ac

coun

t. Im

paire

d tra

de re

ceiva

bles

are

writ

ten-

off w

hen

they

are

iden

tifie

d as

irre

cove

rabl

e.

If su

bseq

uent

to th

e re

porti

ng d

ate

the

amou

nt o

f the

impa

irmen

t los

s de

crea

ses

and

the

decr

ease

ca

n be

rela

ted

obje

ctive

ly to

an

even

t occ

urrin

g af

ter t

he im

pairm

ent w

as re

cogn

ised,

the

prev

ious

ly re

cogn

ised

impa

irmen

t los

s is

reve

rsed

and

reco

gnise

d in

pro

fit o

r los

s to

the

exte

nt th

at th

e ca

rryin

g va

lue

of th

e as

set d

oes

not e

xcee

d its

am

ortis

ed c

ost a

t the

rev

ersa

l dat

e th

at w

ould

hav

e be

en

dete

rmin

ed h

ad n

o im

pairm

ent l

oss

been

reco

gnis

ed fo

r the

ass

et in

prio

r yea

rs.

Der

ecog

nitio

n of

fina

ncia

l ass

ets

A fin

ancia

l ass

et (o

r, wh

ere

appl

icabl

e a

part

of a

fina

ncia

l ass

et o

r par

t of a

gro

up o

f sim

ilar f

inan

cial

as

sets

) is

dere

cogn

ized

when

: -

the

right

s to

rece

ive c

ash

flows

from

the

asse

t hav

e ex

pire

d;

- th

e rig

ht to

rece

ive c

ash

flows

from

the

asse

t is

reta

ined

, but

an

oblig

atio

n is

assu

med

to p

ay th

em

in fu

ll w

ithou

t mat

eria

l del

ay to

a th

ird p

arty

und

er a

“pas

s th

roug

h” a

rrang

emen

t; or

-

the

right

s to

rece

ive c

ash

flows

from

the

asse

t are

tran

sfer

red

and

eith

er (a

) sub

stan

tially

all t

he ri

sks

and

rewa

rds

of th

e as

set h

ave

been

tran

sfer

red,

or (

b) s

ubst

antia

lly a

ll th

e ris

ks a

nd re

ward

s of

the

asse

t hav

e ne

ither

bee

n tra

nsfe

rred

nor r

etai

ned,

but

con

trol o

f the

ass

et h

as b

een

trans

ferre

d.

2.12

D

eriv

ativ

e fin

anci

al in

stru

men

ts

Der

ivativ

e fin

anci

al in

stru

men

ts a

re c

lass

ified

as

held

for t

radi

ng a

nd th

ey in

itially

reco

gnis

ed a

t fai

r va

lue,

and

sub

sequ

ently

are

als

o m

easu

red

at fa

ir va

lue.

The

fair

valu

e is

det

erm

ined

with

refe

renc

e to

quo

ted

mar

ket p

rices

or u

sing

val

uatio

n te

chni

ques

enc

ompa

ssin

g th

e pr

esen

t mar

ket v

alue

s or

co

ntra

ctua

l pric

es o

f ass

ets

rela

ting

to fi

nanc

ial i

nstru

men

ts, a

nd a

ll ot

her i

nput

s. D

eriva

tive

finan

cial

in

stru

men

ts a

re c

lass

ified

as a

sset

s wh

en th

eir f

air v

alue

is p

ositi

ve, a

nd th

ey a

re c

lass

ified

as lia

bilit

ies

when

thei

r fai

r val

ue is

neg

ative

. G

ain

or lo

ss o

n th

ese

finan

cial

inst

rum

ents

is re

cogn

ised

in p

rofit

or

loss

with

in fi

nanc

e in

com

e or

fina

nce

cost

s or

with

in re

venu

e, d

epen

ding

on

thei

r pur

pose

.

2.13

In

vent

orie

s In

vent

orie

s ar

e st

ated

at t

he lo

wer o

f cos

t and

net

real

isab

le v

alue

. Cos

t is

dete

rmin

ed u

sing

the

first

-in

, fir

st-o

ut (

FIFO

) m

etho

d, e

xpec

t for

nat

ural

gas

and

liqu

efie

d na

tura

l gas

, th

e co

st o

f wh

ich

is de

term

ined

usi

ng th

e we

ight

ed a

vera

ge c

ostin

g m

etho

d. T

he c

ost o

f inv

ento

ries

com

prise

s pu

rcha

se

pric

e, ta

xes

(oth

er th

an th

ose

subs

eque

ntly

reco

vera

ble

by th

e G

roup

and

the

Com

pany

from

the

tax

auth

oriti

es),

trans

porta

tion,

han

dlin

g an

d ot

her

cost

s di

rect

ly a

ttrib

utab

le t

o th

e ac

quisi

tion

of

inve

ntor

ies.

Cos

t doe

s no

t inc

lude

bor

rowi

ngs

cost

s. N

et re

alisa

ble

valu

e is

the

estim

ated

sel

ling

pric

e in

the

ordi

nary

cou

rse

of b

usin

ess,

less

attr

ibut

able

var

iabl

e se

lling

expe

nses

.

2.14

C

ash

and

cash

equ

ival

ents

C

ash

and

cash

equ

ivale

nts

incl

ude

cash

in h

and,

dep

osits

hel

d at

cal

l with

ban

ks a

nd o

ther

sho

rt-te

rm

high

ly liq

uid

inve

stm

ents

with

orig

inal

mat

uritie

s of

thre

e m

onth

s or

less

. Fo

r th

e pu

rpos

es o

f th

e ca

sh f

low

stat

emen

t, ca

sh a

nd c

ash

equi

vale

nts

com

prise

cas

h in

han

d de

posi

ts h

eld

at c

all w

ith b

anks

and

oth

er s

hort-

term

hig

hly

liqui

d in

vest

men

ts w

ith o

rigin

al m

atur

ities

F-33

245496 Olive pp138-imp 27/06/2017 09:22 Page 33

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

126

AN

NU

AL R

EPO

RT 2

016

|

of th

ree

mon

ths

or le

ss, a

nd b

ank

over

draf

ts. B

ank

over

draf

ts a

re s

hown

und

er lia

bilit

ies

with

in c

urre

nt

borro

wing

s in

the

bala

nce

shee

t.

2.15

Sh

are

capi

tal

Ord

inar

y sh

ares

are

cla

ssifi

ed a

s eq

uity

. W

hen

an e

ntity

acq

uire

s its

own

sha

res,

the

shar

es a

cqui

red

are

dedu

cted

from

equ

ity. F

or th

e pu

rpos

e of

the

stat

emen

t of c

ompr

ehen

sive

inco

me,

no

gain

or l

oss

is re

cogn

ised

on th

e pu

rcha

se, s

ale,

issu

e or

can

cella

tion

of th

e en

tity’

s ow

n eq

uity

inst

rum

ents

. Sh

are

prem

ium

repr

esen

ts th

e di

ffere

nce

betw

een

the

nom

inal

val

ue o

f the

new

sha

re is

sue

and

the

fair

valu

e of

con

side

ratio

n re

ceiv

ed fo

r sha

res

sold

.

2.16

Tr

ade

paya

bles

Tr

ade

paya

bles

are

reco

gnis

ed w

hen

the

othe

r par

ty h

as p

erfo

rmed

its

oblig

atio

ns u

nder

the

cont

ract

. Tr

ade

paya

bles

are

initi

ally

reco

gnis

ed a

t fai

r val

ue a

nd s

ubse

quen

tly c

arrie

d at

am

ortis

ed c

ost u

sing

th

e ef

fect

ive in

tere

st ra

te m

etho

d.

2.17

Bo

rrowi

ngs

Borro

wing

s ar

e re

cogn

ised

initia

lly a

t fai

r va

lue,

net

of t

rans

actio

n co

sts

incu

rred.

Bor

rowi

ngs

are

subs

eque

ntly

carri

ed a

t am

ortis

ed c

ost.

Any

diffe

renc

e be

twee

n th

e am

ount

at i

nitia

l rec

ogni

tion

and

the

rede

mpt

ion

valu

e is

reco

gnis

ed in

pro

fit o

r los

s in

the

stat

emen

t of c

ompr

ehen

sive

inco

me

over

th

e pe

riod

of th

e bo

rrowi

ngs

usin

g th

e ef

fect

ive in

tere

st ra

te m

etho

d.

Borro

wing

s ar

e cl

assi

fied

as cu

rrent

liabi

litie

s un

less

the

Com

pany

and

the

Gro

up h

as a

n un

cond

ition

al

right

to d

efer

set

tlem

ent o

f the

liab

ility

for a

t lea

st 1

2 m

onth

s af

ter t

he fi

nanc

ial r

epor

ting

date

. Bo

rrowi

ng c

osts

dire

ctly

attri

buta

ble

to t

he a

cqui

sitio

n, c

onst

ruct

ion

or p

rodu

ctio

n of

ass

ets

that

ne

cess

arily

tak

e a

subs

tant

ial t

ime

(mor

e th

an o

ne y

ear)

to g

et r

eady

for

int

ende

d us

e or

sal

e (q

ualif

ying

asse

ts) a

re c

apita

lised

as

part

of th

e co

sts

of th

ose

asse

ts u

ntil t

hose

ass

ets

are

com

plet

ely

read

y fo

r use

or s

ale.

Inte

rest

inco

me

that

rela

te to

tem

pora

ry in

vest

men

t of b

orro

wed

fund

s un

til th

eir

use

for t

he a

cqui

sitio

n of

the

asse

ts a

re d

educ

ted

from

the

acqu

isitio

n co

st o

f the

ass

ets.

2.18

In

com

e ta

x an

d de

ferre

d in

com

e ta

x

Inco

me

tax

Inco

me

tax a

sset

s an

d lia

bilit

ies

for t

he c

urre

nt a

nd p

rior p

erio

ds a

re m

easu

red

at th

e am

ount

exp

ecte

d to

be

reco

vere

d fro

m o

r pai

d to

the

taxa

tion

auth

oritie

s. T

he ta

x ra

tes

and

tax

laws

use

d to

com

pute

th

e am

ount

of i

ncom

e ta

x ar

e th

ose

that

are

ena

cted

or s

ubst

antiv

ely

enac

ted

at th

e ba

lanc

e sh

eet

date

. C

urre

nt i

ncom

e ta

x is

calcu

late

d on

pro

fit b

efor

e ta

x. C

alcu

latio

n of

inc

ome

tax

is ba

sed

on

requ

irem

ents

of t

he L

ithua

nian

regu

lato

ry le

gisl

atio

n on

taxa

tion.

In

201

6 an

d 20

15, a

sta

ndar

d in

com

e ta

x ra

te o

f 15%

was

app

licab

le to

the

com

pani

es in

Lith

uani

a.

Tax l

osse

s can

be

carri

ed fo

rwar

d fo

r ind

efin

ite p

erio

d, e

xcep

t for

loss

es in

curre

d as

a re

sult o

f disp

osal

of

sec

uriti

es a

nd/o

r der

ivativ

e fin

anci

al in

stru

men

ts.

Such

car

ryin

g fo

rwar

d is

disr

upte

d if t

he C

ompa

ny

term

inat

es th

e ac

tiviti

es th

at ca

used

thes

e lo

sses

, exc

ept w

hen

the

Com

pany

disc

ontin

ues

its a

ctiv

ities

due

to th

e re

ason

s th

at a

re b

eyon

d th

e C

ompa

ny’s

con

trol.

The

loss

es fr

om d

ispo

sal o

f sec

uritie

s

and/

or d

eriva

tive

finan

cial

inst

rum

ents

can

be ca

rried

forw

ard

for 5

con

secu

tive

year

s an

d on

ly be

use

d to

redu

ce th

e ta

xabl

e in

com

e ea

rned

from

the

trans

actio

ns o

f the

sam

e na

ture

.

Def

erre

d in

com

e ta

x D

efer

red

inco

me

tax

is ac

coun

ted

for u

sing

the

liabi

lity m

etho

d. D

efer

red

tax

asse

ts a

nd d

efer

red

tax

liabi

lity

are

reco

gnise

d fo

r fut

ure

tax

purp

oses

to re

flect

diff

eren

ces

aris

ing

betw

een

the

tax

base

s of

as

sets

and

liab

ilitie

s an

d th

eir c

arry

ing

amou

nts

in th

e fin

ancia

l sta

tem

ents

. Def

erre

d ta

x lia

bilit

ies

are

reco

gnis

ed o

n al

l tem

pora

ry d

iffer

ence

s th

at w

ill in

crea

se th

e ta

xabl

e pr

ofit

in fu

ture

, whe

reas

def

erre

d ta

x as

sets

are

reco

gnise

d to

the

exte

nt th

at is

pro

babl

e to

redu

ce th

e ta

xabl

e pr

ofit

in fu

ture

. Def

erre

d in

com

e ta

x as

sets

and

liabi

lities

are

not

reco

gnis

ed w

hen

tem

pora

ry d

iffer

ence

s ar

ise fr

om g

oodw

ill or

fro

m in

itial

reco

gniti

on o

f an

asse

t or l

iabi

lity in

a tr

ansa

ctio

n ot

her t

han

a bu

sine

ss c

ombi

natio

n th

at a

t th

e tim

e of

the

trans

actio

n af

fect

s ne

ither

acc

ount

ing,

nor

taxa

ble

prof

it or

loss

. Th

e ca

rryin

g am

ount

s of

def

erre

d in

com

e ta

x as

sets

are

revie

wed

at e

ach

repo

rting

dat

e an

d re

duce

d to

the

exte

nt it

is n

o lo

nger

pro

babl

e th

at s

uffic

ient

taxa

ble

prof

it wi

ll be

ava

ilabl

e ag

ains

t whi

ch s

uch

defe

rred

inco

me

tax

asse

ts c

ould

be

utilis

ed in

full o

r in

part.

Def

erre

d in

com

e ta

x as

sets

are

redu

ced

to a

n am

ount

whi

ch is

likel

y to

redu

ce th

e ta

xabl

e pr

ofit

in fu

ture

. D

efer

red

inco

me

tax i

s de

term

ined

usi

ng ta

x rat

es th

at a

re e

xpec

ted

to a

pply

when

the

rela

ted

defe

rred

inco

me

asse

t is

real

ized

or t

he d

efer

red

inco

me

tax

liabi

lity

is se

ttled

. D

efer

red

inco

me

tax

asse

ts a

nd lia

bilit

ies

are

offs

et w

hen

ther

e is

a le

gally

enf

orce

able

righ

t to

offs

et

curre

nt ta

x as

sets

aga

inst

cur

rent

tax

liabi

litie

s an

d wh

en th

e de

ferre

d in

com

e ta

xes

rela

te to

the

sam

e fis

cal a

utho

rity.

Cur

rent

and

def

erre

d in

com

e ta

x

Cur

rent

and

def

erre

d in

com

e ta

x ar

e re

cogn

ised

as

inco

me

or e

xpen

ses

and

incl

uded

in n

et p

rofit

or

loss

for t

he re

porti

ng p

erio

d, e

xcep

t for

the

case

s wh

en ta

x ar

ises

from

a tr

ansa

ctio

n or

eve

nt th

at is

re

cogn

ised

dire

ctly

in e

quity

or o

ther

com

preh

ensi

ve in

com

e in

the

sam

e or

sub

sequ

ent p

erio

d or

on

busi

ness

com

bina

tion.

2.19

Em

ploy

ee b

enef

its

Soci

al s

ecur

ity c

ontri

butio

ns

The

Com

pany

and

the

Gro

up p

ay s

ocia

l sec

urity

con

tribu

tions

to th

e St

ate

Socia

l Sec

urity

Fun

d (th

e Fu

nd) o

n be

half

of it

s em

ploy

ees

base

d on

the

defin

ed c

ontri

butio

n pl

an in

acc

orda

nce

with

the

loca

l le

gal r

equi

rem

ents

. A d

efin

ed c

ontri

butio

n pl

an is

a p

lan

unde

r whi

ch th

e G

roup

and

the

Com

pany

pay

fix

ed c

ontri

butio

ns in

to t

he F

und

and

will

have

no

lega

l or

cons

truct

ive

oblig

atio

ns t

o pa

y fu

rther

co

ntrib

utio

ns if

the

Fun

d do

es n

ot h

old

suffi

cien

t as

sets

to p

ay a

ll em

ploy

ees

bene

fits

rela

ting

to

empl

oyee

ser

vice

in th

e cu

rrent

and

prio

r per

iod.

The

soc

ial s

ecur

ity c

ontri

butio

ns a

re re

cogn

ised

as

an e

xpen

se o

n an

acc

rual

bas

is an

d ar

e in

clud

ed w

ithin

rem

uner

atio

n ex

pens

es.

Term

inat

ion

bene

fits

Term

inat

ion

bene

fits

are

paya

ble

whe

neve

r an

em

ploy

ee’s

em

ploy

men

t is

ter

min

ated

bef

ore

the

norm

al re

tirem

ent d

ate

or w

hene

ver a

n em

ploy

ee a

ccep

ts v

olun

tary

redu

ndan

cy in

exc

hang

e fo

r the

se

bene

fits.

The

Com

pany

and

the

Gro

up r

ecog

nise

ter

min

atio

n be

nefit

s wh

en i

t is

dem

onst

rabl

y co

mm

itted

to e

ither

term

inat

ing

the

empl

oym

ent o

f cur

rent

em

ploy

ees

acco

rdin

g to

a d

etai

led

form

al

plan

with

out p

ossi

bility

of w

ithdr

awal

or p

rovid

ing

term

inat

ion

bene

fits

as a

resu

lt of

an

offe

r mad

e to

en

cour

age

volu

ntar

y re

dund

ancy

. Non

-cur

rent

ben

efits

are

reco

gnise

d at

pre

sent

val

ue d

iscou

nted

us

ing

mar

ket i

nter

est r

ate.

F-34

245496 Olive pp138-imp 27/06/2017 09:22 Page 34

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

127

AN

NU

AL R

EPO

RT 2

016

|

Actu

aria

l gai

ns o

r los

ses

arisi

ng fr

om a

djus

tmen

ts b

ased

on

expe

rienc

e or

from

cha

nges

in a

ctua

rial

assu

mpt

ions

are

reco

gnise

d im

med

iate

ly wi

thin

the

Gro

up's

and

the

Com

pany

's ot

her c

ompr

ehen

sive

inco

me.

All

past

ser

vice

cost

s ar

e re

cogn

ised

imm

edia

tely.

Long

-term

em

ploy

ee b

enef

its

Each

em

ploy

ee o

f re

tirem

ent

age

who

term

inat

es h

is/he

r em

ploy

men

t wi

th t

he G

roup

and

the

C

ompa

ny u

pon

retir

emen

t is

entit

led

to re

ceive

a p

aym

ent e

qual

to 2

mon

thly

sala

ries

acco

rdin

g to

Li

thua

nian

laws

. A lia

bilit

y fo

r suc

h pe

nsio

n be

nefit

s is

reco

gnise

d in

the

stat

emen

t of f

inan

cial

pos

ition

and

it re

flect

s th

e pr

esen

t val

ue o

f the

se b

enef

its a

t the

dat

e of

the

bala

nce

shee

t. Th

e af

orem

entio

ned

non-

curre

nt lia

bility

for p

ensi

on b

enef

its to

em

ploy

ees

at th

e re

porti

ng d

ate

is es

timat

ed w

ith re

fere

nce

to a

ctua

rial v

alua

tions

usi

ng th

e pr

ojec

ted

rela

tive

unit

met

hod.

The

pre

sent

val

ue o

f the

def

ined

non

-cu

rrent

liab

ility

for p

ensi

on b

enef

its to

em

ploy

ees

is de

term

ined

by

disc

ount

ing

the

estim

ated

futu

re

cash

flow

s us

ing

the

effe

ctive

inte

rest

rate

s as

set

for g

over

nmen

t bon

ds d

enom

inat

ed in

a c

urre

ncy

in w

hich

the

bene

fits

will b

e pa

id to

em

ploy

ees

and

that

hav

e m

atur

ity te

rm s

imila

r to

that

of t

he re

late

d lia

bilit

y.

2.20

Pr

ovis

ions

Pr

ovis

ions

are

reco

gnis

ed w

hen

the

Gro

up/C

ompa

ny h

as a

lega

l obl

igat

ion

or ir

revo

cabl

e co

mm

itmen

t as

a re

sult

of p

ast e

vent

, it i

s pr

obab

le th

at a

n ou

tflow

of r

esou

rces

em

body

ing

econ

omic

bene

fits

will

be re

quire

d to

set

tle th

e ob

ligat

ion

and

a re

liabl

e es

timat

e ca

n be

mad

e of

the

amou

nt o

f the

obl

igat

ion.

Ex

pens

es re

late

d to

pro

visio

ns a

re re

cord

ed in

pro

fit o

r los

s, n

et o

f com

pens

atio

n re

ceiva

ble.

If th

e ef

fect

of t

he ti

me

valu

e of

mon

ey is

mat

eria

l, th

e am

ount

of p

rovis

ion

is di

scou

nted

usi

ng th

e ef

fect

ive

pre-

tax

disc

ount

rate

bas

ed o

n th

e in

tere

st ra

tes

for t

he p

erio

d an

d ta

king

into

acc

ount

spe

cific

risk

s as

soci

ated

with

the

prov

isio

n as

app

ropr

iate

. Whe

re d

iscou

ntin

g is

used

, the

incr

ease

in th

e pr

ovis

ion

due

to th

e pa

ssag

e of

tim

e is

reco

gnis

ed a

s a

finan

ce c

ost.

Prov

ision

s fo

r one

rous

con

tract

Pr

ovis

ions

for

one

rous

con

tract

rep

rese

nt u

navo

idab

le c

osts

of m

eetin

g co

ntra

ctua

l obl

igat

ions

in

exce

ss o

f the

eco

nom

ic b

enef

its e

xpec

ted

to re

ceive

. Pro

visio

ns a

re m

easu

red

at p

rese

nt v

alue

usi

ng

the

effe

ctive

inte

rest

rate

met

hod.

2.21

R

even

ue a

nd e

xpen

se re

cogn

ition

R

even

ue is

reco

gnise

d to

the

exte

nt th

at it

is p

roba

ble

that

the

econ

omic

bene

fits

asso

ciat

ed w

ith a

tra

nsac

tion

will f

low

to th

e G

roup

or t

he C

ompa

ny a

nd th

e am

ount

of r

even

ue ca

n be

relia

bly m

easu

red.

R

even

ue is

mea

sure

d at

the

fair

valu

e of

the

cons

ider

atio

n re

ceive

d or

rece

ivabl

e fo

r the

sal

e of

goo

ds

or s

ervic

es, n

et o

f val

ue a

dded

tax,

retu

rns

and

disc

ount

s.

Rev

enue

from

sal

e of

ele

ctric

ity to

end

cus

tom

ers

The

Gro

up’s

rev

enue

fro

m s

ale

of e

lect

ricity

to

end

cust

omer

s in

clud

es p

rodu

ctio

n, t

rans

mis

sion

, di

strib

utio

n, s

uppl

y, p

ublic

ser

vice

oblig

atio

ns (P

SO) a

nd o

ther

ser

vices

rend

ered

in th

e pr

oces

s of

sa

le o

f ele

ctric

ity to

end

cus

tom

ers.

The

pric

es o

f tra

nsm

issio

n, d

istrib

utio

n an

d PS

O s

ervic

es p

rovid

ed

by th

e G

roup

com

pani

es a

re re

gula

ted

by th

e N

atio

nal C

omm

issio

n fo

r Ene

rgy

Con

trol a

nd P

rices

(h

erei

nafte

r “th

e C

omm

issi

on”).

R

even

ue fr

om e

lect

ricity

sal

es to

hou

seho

ld c

usto

mer

s is

reco

gnise

d wh

en e

lect

ricity

is s

uppl

ied,

de

clar

ed b

ased

on

met

er d

ata

and

paid

. An

estim

ate

of a

ccru

ed re

venu

e is

mad

e to

reco

rd e

lect

ricity

su

pplie

d bu

t not

yet

dec

lare

d by

hou

seho

ld c

usto

mer

s at

the

end

of e

ach

repo

rting

per

iod.

Th

is

estim

ate

is ba

sed

on h

istor

ical

exp

erie

nce

and

aver

age

paym

ent

for

elec

trici

ty p

erio

d by

the

cu

stom

ers.

R

even

ue fr

om e

lect

ricity

sal

es to

bus

ines

s cu

stom

ers

is re

cogn

ised

whe

n el

ectri

city

is s

uppl

ied

base

d on

the

actu

al c

onsu

mpt

ion

of e

lect

ricity

whi

ch is

det

erm

ined

with

refe

renc

e to

met

er re

adin

gs.

Reg

ulat

ion

of ta

riffs

and

pro

fitab

ility

Pr

ofita

bilit

y of

ind

ividu

al G

roup

com

pani

es a

nd t

heir

indi

vidua

l ac

tiviti

es i

s re

gula

ted

by t

he

Com

miss

ion

thro

ugh

the

serv

ice ta

riffs

app

rove

d fo

r the

nex

t per

iods

. The

leve

l of t

ariff

s de

pend

s on

th

e pr

ojec

ted

cost

s an

d vo

lum

e of

ser

vices

for t

he n

ext p

erio

d, th

e ex

tent

to w

hich

the

prev

ious

per

iod

earn

ings

are

at v

aria

nce

with

the

regu

late

d le

vel,

and

othe

r fac

tors

. Ac

tual

cos

ts o

f reg

ulat

ed a

ctiv

ities

incu

rred

by th

e G

roup

dur

ing

the

year

may

be

at v

aria

nce

with

the

proj

ecte

d co

sts

that

are

con

side

red

durin

g th

e ap

prov

al o

f the

tarif

fs, a

nd th

e ac

tual

vol

ume

of s

ervic

es

may

be

at v

aria

nce

with

the

proj

ecte

d on

e. A

ccor

ding

ly, a

ctua

l ear

ning

s fro

m re

gula

ted

activ

ities

may

be

at v

aria

nce

with

the

regu

late

d le

vel,

and

the

resu

lting

diffe

renc

e wi

ll af

fect

the

futu

re ta

riffs

of

serv

ices

. Th

e G

roup

doe

s no

t rec

ogni

se a

sset

s an

d lia

biliti

es o

f the

reg

ulat

ed a

ctivi

ties

that

are

inte

nded

to

elim

inat

e th

e m

ismat

ches

bet

ween

the

curre

nt y

ear e

arni

ngs

and

the

regu

late

d le

vel,

prov

ided

the

diffe

renc

e wi

ll be

reco

vere

d/re

fund

ed th

roug

h th

e pr

ovisi

on o

f ser

vices

in th

e fu

ture

. Ta

riffs

for e

lect

ricity

and

gas

dist

ribut

ion

are

regu

late

d by

the

Com

miss

ion

by e

stab

lishi

ng th

e pr

ice

caps

. The

spe

cific

pric

es fo

r the

dist

ribut

ion

serv

ices

are

est

ablis

hed

by th

e G

roup

com

pany

, whi

ch is

a

dist

ribut

ion

netw

ork

oper

ator

, with

in th

e lim

its a

ppro

ved

by th

e C

omm

issio

n.

Sale

of l

ique

fied

gas

to re

gula

ted

cons

umer

s is

regu

late

d th

roug

h se

tting

the

sale

pric

es.

Tarif

fs fo

r ele

ctric

ity tr

ansm

issi

on a

nd P

SO s

ervic

es a

re re

gula

ted

by th

e C

omm

issio

n by

est

ablis

hing

th

e pr

ice

caps

for t

he s

ervic

es. T

he s

pecif

ic p

rices

and

tarif

fs fo

r the

tran

smis

sion

and

PSO

ser

vices

ar

e es

tabl

ishe

d by

the

serv

ice

prov

ider

that

is n

ot p

art o

f the

Gro

up a

nd w

ithin

the

limits

app

rove

d by

th

e Co

mm

issio

n.

Tarif

fs o

f ele

ctric

ity s

old

by th

e pr

oduc

ers

and

inde

pend

ent s

uppl

iers

as

well

as ta

riffs

for c

apac

ity

rese

rve

serv

ices

are

not r

egul

ated

, exc

ept w

hen

the

prod

ucer

or i

ndep

ende

nt s

uppl

ier h

olds

mor

e th

an

25%

of t

he m

arke

t, in

whi

ch c

ase

the

proc

edur

e fo

r tar

iff s

ettin

g is

esta

blis

hed

by th

e C

omm

issio

n.

Tarif

fs fo

r im

port

and

expo

rt of

ele

ctric

ity a

re n

ot re

gula

ted.

Rev

enue

from

pro

visio

n of

PSO

ser

vice

s Th

e G

roup

ens

ures

sec

urity

of e

lect

ricity

sup

ply

and

the

rese

rves

of e

nerg

y sy

stem

. Whe

n pr

ovid

ing

thes

e PS

O s

ervic

es th

e G

roup

ear

ns in

com

e an

d in

curs

exp

ense

s. P

SO s

ervic

e fe

es a

re th

e fe

es p

aid

to t

he s

uppl

iers

of

elec

trici

ty u

nder

pub

lic s

ervic

e ob

ligat

ions

sch

eme

(bas

ed o

n pr

e-se

t an

nual

qu

antit

ies

and

price

s of

ser

vices

). Su

bseq

uent

ly, th

ese

serv

ices

are

pro

vided

to th

e di

strib

utio

n sy

stem

op

erat

ors

and

elec

tricit

y us

ers

at a

tarif

f est

ablis

hed

by th

e C

omm

issio

n.

The

Gro

up's

com

pany

eng

aged

in th

e pr

oduc

tion

of e

lect

ricity

gen

erat

es in

com

e fro

m p

ublic

ser

vice

oblig

atio

n fe

es (

PSO

ser

vice

fees

). PS

O s

ervic

e fe

es a

re t

he f

ees

paya

ble

to t

he p

rodu

cers

of

elec

trici

ty u

nder

a p

ublic

ser

vice

oblig

atio

ns s

chem

e ba

sed

on p

re-d

eter

min

ed a

nnua

l qua

ntitie

s an

d pr

ices

of s

ervic

es s

et b

y th

e C

omm

issio

n. T

he ta

riff i

s es

tabl

ishe

d by

the

Com

miss

ion

base

d on

the

estim

ates

of v

aria

ble

elec

tricit

y pr

oduc

tion

cost

s pr

ovid

ed b

y th

e pr

oduc

ers.

The

Gro

up's

subs

idia

ry, w

hich

is a

dis

tribu

tion

netw

ork

oper

ator

, col

lect

s PS

O s

ervic

e fe

es fr

om u

sers

at

tarif

fs e

stab

lishe

d by

the

Com

miss

ion

and

trans

fers

the

fees

to th

e el

ectri

city

trans

miss

ion

syst

em

F-35

245496 Olive pp138-imp 27/06/2017 09:22 Page 35

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

128

AN

NU

AL R

EPO

RT 2

016

|

oper

ator

(a c

ompa

ny w

hich

doe

s no

t bel

ong

to th

e G

roup

), wh

ich

is re

spon

sibl

e fo

r the

allo

catio

n of

PS

O s

ervic

e fe

es to

ele

ctric

ity p

rodu

cers

. Fe

es c

olle

cted

from

use

rs fo

r PSO

ser

vices

, whi

ch a

re la

ter

allo

cate

d to

ele

ctric

ity p

rodu

cers

that

do

not b

elon

g to

the

Gro

up, a

re re

cogn

ised

bas

ed o

n th

e ac

tual

am

ount

of e

lect

ricity

con

sum

ed a

nd a

t tar

iffs

esta

blish

ed b

y th

e C

omm

issio

n. P

SO s

ervic

e fe

es th

at

are

late

r al

loca

ted

to t

he G

roup

's su

bsid

iary

eng

aged

in e

lect

ricity

pro

duct

ion

are

reco

gnis

ed a

s re

venu

e ba

sed

on th

e es

timat

es o

f var

iabl

e an

d fix

ed e

lect

ricity

pro

duct

ion

cost

s pr

ovid

ed b

y th

e pr

oduc

ers,

alth

ough

mon

thly

paym

ents

mad

e by

the

elec

tricit

y tra

nsm

issio

n sy

stem

ope

rato

r to

the

elec

trici

ty p

rodu

cer a

re e

stab

lishe

d ba

sed

on p

re-d

eter

min

ed q

uant

ities

and

price

s. T

he C

omm

issio

n ap

prov

es th

e ac

tual

rece

ivabl

e am

ount

of P

SO se

rvic

es fe

es w

ithin

a ye

ar a

fter t

he e

nd o

f the

repo

rting

pe

riod

and

the

diffe

renc

e is

paid

to th

e el

ectri

city

trans

miss

ion

syst

em o

pera

tor w

ithin

a s

econ

d ye

ar

afte

r the

end

of t

he re

porti

ng p

erio

d.

Thus

, the

diff

eren

ce b

etwe

en a

ccru

ed re

venu

e an

d ac

tual

ly p

aid

amou

nts

durin

g a

year

is re

cogn

ised

as

a n

on-c

urre

nt a

mou

nt re

ceiv

able

/pay

able

(und

er th

e lin

e ite

ms

‘Am

ount

s re

ceiv

able

afte

r one

yea

r’ or

‘Oth

er n

on-c

urre

nt a

mou

nts

paya

ble

and

liabi

litie

s’).

At t

he e

nd o

f the

upc

omin

g ye

ar, t

his

amou

nt

is re

clas

sifie

d as

a c

urre

nt a

mou

nt re

ceiv

able

/pay

able

(und

er th

e lin

e ite

ms

‘Oth

er a

mou

nts

rece

ivab

le’

or ‘

Trad

e pa

yabl

es’).

Am

ount

s pa

yabl

e ea

ch m

onth

by

the

dist

ribut

ion

netw

ork

subs

idia

ry t

o th

e el

ectri

city

tran

smis

sion

sys

tem

ope

rato

r are

reco

gnis

ed a

s cu

rrent

am

ount

s pa

yabl

e (u

nder

the

line

item

'Tra

de p

ayab

les')

.

Rev

enue

from

dist

ribut

ion

and

supp

ly o

f nat

ural

gas

R

even

ue fr

om n

on-h

ouse

hold

cus

tom

ers

for t

he d

istrib

utio

n of

nat

ural

gas

is re

cogn

ised

on

a m

onth

ly ba

sis

with

ref

eren

ce t

o th

e re

adin

gs o

f mea

surin

g de

vices

rep

orte

d by

the

cus

tom

ers

or,

if su

ch

read

ings

hav

e no

t bee

n re

porte

d by

the

cust

omer

s, w

ith re

fere

nce

to th

e qu

antit

ies

of g

as c

alcu

late

d ac

cord

ing

to th

e m

etho

dolo

gy fo

r the

calc

ulat

ion

of q

uant

ities

of n

atur

al g

as a

ppro

ved

by th

e di

strib

utor

.

Rev

enue

from

non

-hou

seho

ld c

usto

mer

s fo

r sup

ply

of n

atur

al g

as is

reco

gnis

ed o

n a

mon

thly

basis

wi

th re

fere

nce

to th

e re

adin

gs o

f mea

surin

g de

vices

repo

rted

by th

e cu

stom

ers

and

chec

ked

by th

e di

strib

utio

n sy

stem

ope

rato

r (on

an

accr

ual b

asis

). R

even

ue fr

om h

ouse

hold

cus

tom

ers

is re

cogn

ised

on

a m

onth

ly ba

sis w

ith re

fere

nce

to th

e re

adin

gs o

f mea

surin

g de

vices

repo

rted

by th

e cu

stom

ers

and

takin

g in

to a

ccou

nt th

e ad

just

men

ts fo

r mism

atch

es b

etwe

en th

e qu

antit

ies

of g

as d

ecla

red

and

the

quan

titie

s of

gas

act

ually

con

sum

ed (o

n an

acc

rual

bas

is).

Rev

enue

from

sup

ply

of liq

uefie

d na

tura

l gas

Li

quef

ied

natu

ral g

as is

sol

d to

regu

late

d en

ergy

pro

duce

rs a

t the

mar

ket p

rice

set a

nd a

ppro

ved

by

the

Com

miss

ion.

Non

-regu

late

d sa

les

of n

atur

al g

as a

re c

ondu

cted

at t

he p

rices

agr

eed

betw

een

the

parti

es. R

even

ue is

reco

gnise

d on

mon

thly

basis

acc

ordi

ng to

qua

ntity

sup

plie

d.

Rev

enue

from

the

LNG

T se

curit

y co

mpo

nent

D

ue to

cha

nges

in re

gula

tions

, the

app

rove

d m

arke

t pric

e fo

r liq

uefie

d na

tura

l gas

for 2

016

is lo

wer

than

its

actu

al c

ost;

the

diffe

renc

e is

com

pens

ated

by

the

Liqu

efie

d Na

tura

l Gas

Tra

nsm

issio

n (L

NG

T)

secu

rity c

ompo

nent

. Rev

enue

from

the

LNG

T se

curit

y com

pone

nt is

con

side

red

to b

e pa

rt of

regu

late

d re

venu

e an

d is

reco

gnis

ed w

ith re

fere

nce

to th

e re

ports

rece

ived

from

nat

ural

gas

tran

smis

sion

sys

tem

op

erat

or (h

erei

nafte

r “TS

O”)

who

adm

inist

ers

colle

ctio

n an

d di

strib

utio

n of

thes

e pa

ymen

ts.

Purs

uant

to A

rticl

e 5.

2 of

the

Law

on L

NG

Ter

min

al, a

ll us

ers

of n

atur

al g

as tr

ansm

issi

on s

yste

m

(incl

udin

g th

e en

d us

ers)

are

requ

ired

to p

ay a

dditio

nal s

ecur

ity c

ompo

nent

toge

ther

with

oth

er fe

es

paya

ble

for n

atur

al g

as tr

ansm

issio

n se

rvic

es. T

he p

aym

ents

are

col

lect

ed b

y th

e TS

O d

irect

ly fro

m

the

cons

umer

s or

from

nat

ural

gas

sup

plie

rs in

cas

e th

e co

nsum

ers

have

no

dire

ct c

ontra

cts

with

the

TSO

. The

Com

miss

ion

deci

des

annu

ally

on

the

amou

nt o

f the

sec

urity

com

pone

nt in

pro

porti

on to

the

quan

titie

s of

nat

ural

gas

con

sum

ed b

y th

e us

ers

(eith

er th

roug

h di

rect

con

sum

ptio

n or

resa

le).

Base

d on

the

Com

miss

ion’

s R

esol

utio

n, p

art o

f the

col

lect

ed T

SO fu

nds

are

trans

ferre

d to

the

Gro

up.

Rel

oad

and

stor

age

serv

ices

Th

e G

roup

act

s as

an

inte

rmed

iary

in re

nder

ing

LNG

relo

ad a

nd s

tora

ge s

ervic

es a

nd d

oes

not i

ncur

an

y in

vent

ory

pric

e ris

k, th

e G

roup

doe

s no

t acc

ount

for

LNG

acq

uire

d fo

r re

load

pur

pose

s as

its

inve

ntor

y, b

ut ra

ther

acc

ount

s fo

r rev

enue

from

pro

visio

n of

relo

ad s

ervic

es in

the

prof

it or

loss

upo

n th

e co

mpl

etio

n of

thes

e se

rvic

es.

Con

stru

ctio

n co

ntra

cts

Whe

n th

e ou

tcom

e of

a c

onst

ruct

ion

cont

ract

can

be

estim

ated

relia

bly,

con

tract

reve

nue

and

cont

ract

co

sts

are

reco

gnise

d by

refe

renc

e to

the

work

act

ually

com

plet

ed a

t the

end

of e

ach

repo

rting

per

iod,

i.e

. usi

ng th

e st

age

of c

ompl

etio

n (o

ther

wise

refe

rred

to a

s th

e pe

rcen

tage

of c

ompl

etio

n) m

etho

d fo

r lo

ng-te

rm c

ontra

cts.

Und

er t

his

met

hod,

con

tract

rev

enue

and

con

tract

cos

ts a

re m

easu

red

by

refe

renc

e to

the

perc

enta

ge o

f act

ual c

osts

incu

rred

and

actu

al re

venu

e ea

rned

to d

ate

to e

stim

ated

to

tal c

ontra

ct c

osts

and

con

tract

reve

nue.

Inco

me

from

new

cus

tom

er c

onne

ctio

n

Fees

rec

eive

d af

ter

1 Ju

ly 20

09 fo

r th

e co

nnec

tion

of n

ew c

usto

mer

s an

d pr

oduc

ers

to e

lect

ricity

ne

twor

k an

d fo

r the

disl

ocat

ion

and

reco

nstru

ctio

n of

ele

ctric

ity n

etwo

rk fa

ciliti

es o

n re

ques

t of t

he

cust

omer

, pro

duce

r or a

ny o

ther

ent

ity, a

re re

cogn

ised

as re

venu

e up

on c

onne

ctio

n.

The

abov

e-m

entio

ned

fees

rece

ived

befo

re 1

Jul

y 20

09 w

ere

initi

ally

reco

gnis

ed a

s de

ferre

d in

com

e an

d su

bseq

uent

ly re

cogn

ised

as in

com

e on

a p

ropo

rtion

ate

basi

s ov

er th

e us

eful

life

of t

he re

late

d ne

wly

crea

ted

prop

erty

, pla

nt a

nd e

quip

men

t. T

he re

late

d co

sts

com

prisi

ng th

e ac

quisi

tion

cost

of

prop

erty

, pla

nt a

nd e

quip

men

t and

oth

er c

osts

wer

e ca

pita

lised

and

dep

reci

ated

ove

r the

est

imat

ed

usef

ul li

fe o

f the

ass

ets

capi

talis

ed.

Paym

ents

mad

e by

use

rs fo

r the

con

nect

ion

to th

e ga

s sy

stem

are

reco

rded

as

defe

rred

inco

me

and

reco

gnis

ed a

s in

com

e ov

er th

e de

prec

iatio

n pe

riod

of th

e ca

pita

lised

ass

ets

conc

erne

d.

Rev

enue

from

sal

e of

ser

vices

In

com

e fro

m s

ale

of s

ervic

es is

reco

gnis

ed in

the

perio

d wh

en th

e se

rvic

es h

ave

been

rend

ered

with

re

fere

nce

to th

e st

age

of c

ompl

etio

n of

the

spec

ific tr

ansa

ctio

n, w

hich

is d

eter

min

ed a

s a

perc

enta

ge

of s

ervic

es a

ctua

lly re

nder

ed c

ompa

red

with

the

tota

l ser

vices

to b

e re

nder

ed.

Inco

me

from

sal

e of

ser

vices

is re

cogn

ised

whe

n it

is pr

obab

le th

at e

cono

mic

bene

fits

will b

e re

ceive

d in

rela

tion

to th

e se

rvic

es re

nder

ed a

nd a

relia

ble

estim

ate

of th

e am

ount

of i

ncom

e ca

n be

mad

e.

Inco

me

is re

cogn

ised

whe

n se

rvice

s ar

e re

nder

ed.

Inco

me

from

sal

e of

goo

ds

Inco

me

from

sal

e of

goo

ds is

reco

gnis

ed w

hen

all r

isks

asso

ciat

ed w

ith lo

ss o

r dam

age

to g

oods

, as

well a

s an

y in

crem

enta

l cos

ts a

risin

g fro

m e

vent

s oc

curri

ng s

ubse

quen

t to

the

deliv

ery

of g

oods

to th

e ca

rrier

or

to th

e ag

reed

pla

ce o

f des

tinat

ion,

are

tran

sfer

red

from

the

Gro

up to

a b

uyer

und

er th

e st

anda

rd s

ale

term

s (IN

CO

TERM

S) a

gree

d wi

th t

he b

uyer

, an

d th

e re

cove

rabi

lity

of t

he r

elat

ed

amou

nts

rece

ivabl

e is

prob

able

.

Inte

rest

inco

me

Inte

rest

inco

me

is re

cogn

ised

on

accr

ual b

asis

usin

g th

e ef

fect

ive in

tere

st r

ate

met

hod.

Fo

r th

e pu

rpos

e of

the

cash

flow

sta

tem

ent,

inte

rest

rece

ived

is at

tribu

ted

to in

vest

ing

activ

ities

, whe

reas

for

the

purp

ose

of th

e st

atem

ent o

f pro

fit o

r los

s, in

tere

st re

ceive

d is

reco

gnis

ed a

s fin

ance

inco

me.

F-36

245496 Olive pp138-imp 27/06/2017 09:22 Page 36

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

129

AN

NU

AL R

EPO

RT 2

016

|

Div

iden

d in

com

e Di

viden

d in

com

e is

rec

ogni

sed

afte

r th

e sh

areh

olde

rs’

right

s to

rec

eive

pay

men

t ha

ve b

een

esta

blish

ed.

Divi

dend

s re

ceive

d ar

e at

tribu

ted

to in

vest

ing

activ

ities

in th

e st

atem

ent o

f cas

h flo

ws.

Div

iden

ds o

f su

bsid

iarie

s, a

ttrib

utab

le t

o th

e pa

rent

com

pany

, ar

e el

imin

ated

in t

he c

onso

lidat

ed

finan

cial

sta

tem

ents

.

Leas

e in

com

e Le

ase

inco

me

is re

cogn

ised

on a

stra

ight

-line

bas

is ov

er th

e le

ase

perio

d.

Expe

nse

reco

gnitio

n Ex

pens

es a

re r

ecog

nise

d in

the

sta

tem

ent

of c

ompr

ehen

sive

inco

me

as in

curre

d by

the

acc

rual

m

etho

d.

2.22

Em

issi

on a

llowa

nces

Ba

sed

on th

e EU

Dire

ctive

200

3/07

/EC

, the

gre

enho

use

gas

emis

sion

s tra

ding

sche

me

was

deve

lope

d wh

ich

cam

e in

to fo

rce

on 1

Jan

uary

200

5. T

he fi

rst p

erio

d of

ope

ratio

n of

this

sche

me

cove

red

3 ye

ars

from

200

5 to

200

7; th

e se

cond

per

iod

cove

red

5 ye

ars

from

200

8 to

201

2, a

nd th

e th

ird p

erio

d co

vers

7

year

s fro

m 2

013

to 2

020.

The

Sch

eme’

s op

erat

ion

perio

d is

in li

ne w

ith th

e pe

riod

esta

blis

hed

unde

r th

e Ky

oto

Agre

emen

t. Th

e sy

stem

func

tions

on

'cap'

and

'tra

de' b

asis

. The

gov

ernm

ents

of t

he E

U M

embe

r Sta

tes

are

requ

ired

to s

et c

aps

for e

ach

emis

sion

unit

in th

e sc

hem

e an

d fo

r the

per

iod

of

impl

emen

tatio

n.

Thes

e ca

ps a

re s

pecif

ied

in t

he N

atio

nal A

lloca

tion

Plan

to

be d

evel

oped

by

a re

spon

sibl

e au

thor

ity o

f eac

h M

embe

r Sta

te (i

n Li

thua

nia

– th

e M

inist

ry o

f Env

ironm

ent).

The

Nat

iona

l Al

loca

tion

Plan

det

erm

ines

the

ann

ual

emiss

ion

amou

nt (

mea

sure

d as

ton

s of

car

bon

diox

ide

equi

vale

nt) f

or e

ach

emiss

ion

unit

and

each

per

iod

and

allo

cate

s an

nual

em

issio

n al

lowa

nces

. A

Mem

ber S

tate

has

an

oblig

atio

n to

allo

cate

em

issio

n al

lowa

nces

by

28 F

ebru

ary

of e

ach

year

in

acco

rdan

ce w

ith th

e N

atio

nal A

lloca

tion

Plan

. A M

embe

r Sta

te is

to a

ssur

e th

at a

n op

erat

or o

f eac

h em

issi

on u

nit w

ill s

ubm

it da

ta o

n th

e un

it’s

actu

al a

mou

nt o

f gre

enho

use

gas

emis

sion

s du

ring

the

curre

nt c

alen

dar y

ear n

ot la

ter t

han

by 3

0 Ap

ril o

f the

nex

t yea

r.

Inta

ngib

le a

sset

s Th

e EU

em

issio

n al

lowa

nces

are

trea

ted

as in

tang

ible

ass

ets.

The

se a

sset

s ar

e pr

ovid

ed b

y th

e st

ate

as a

non

-mon

etar

y gr

ant o

r acq

uire

d by

an

entit

y an

d ar

e re

cogn

ized

at fa

ir va

lue

at in

cept

ion.

Af

ter t

he in

itial r

ecog

nitio

n em

issio

n al

lowa

nces

are

car

ried

usin

g th

e re

valu

atio

n m

etho

d us

ing

the

activ

e m

arke

t pr

ices.

Inc

reas

es i

n th

e ca

rryin

g am

ount

aris

ing

on t

he r

eval

uatio

n of

em

issio

n al

lowa

nces

are

pre

sent

ed in

oth

er c

ompr

ehen

sive

inco

me

and

cred

ited

agai

nst r

eval

uatio

n re

serv

e di

rect

ly to

equ

ity a

nd d

ecre

ases

in e

xces

s of

the

prev

ious

ly ac

cum

ulat

ed a

mou

nt in

the

reva

luat

ion

rese

rve

are

reco

gnis

ed in

the

prof

it or

loss

. O

n re

aliz

atio

n of

em

issio

n al

lowa

nces

, the

resp

ectiv

e po

sitiv

e ba

lanc

e of

the

reva

luat

ion

rese

rve

is ta

ken

dire

ctly

to re

tain

ed e

arni

ngs.

Gov

ernm

ent g

rant

Th

e EU

em

issio

n al

lowa

nces

pro

vided

to th

e G

roup

at n

o co

nsid

erat

ion

are

treat

ed a

s a

non-

mon

etar

y go

vern

men

t gra

nt w

hich

is re

cogn

ised

at f

air v

alue

at t

he d

ate

of its

rece

ipt o

r iss

uanc

e. S

ubse

quen

tly,

the

gove

rnm

ent g

rant

is re

cogn

ised

as in

com

e in

pro

porti

on to

em

issio

n al

lowa

nces

utili

sed

durin

g th

e va

lidity

per

iod

of e

miss

ion

allo

wanc

es o

r upo

n th

eir d

ispos

al.

Prov

ision

for t

he u

tilisa

tion

of e

miss

ion

allo

wan

ces

As th

e G

roup

mak

es e

mis

sions

, a lia

bilit

y ar

ises

to p

ay fo

r the

se e

miss

ions

to th

e st

ate

usin

g em

issio

n al

lowa

nces

, th

e no

min

al v

alue

of

whic

h is

equa

l to

the

quan

tity

of e

mis

sion

s.

Such

liab

ility

is a

prov

isio

n wh

ich

is es

timat

ed a

t a

valu

e eq

ual t

o ex

pens

es t

o be

incu

rred

by t

he G

roup

for

the

se

ttlem

ent o

f lia

bility

at f

inan

cial

repo

rting

dat

e. T

he li

abilit

y ca

n be

offs

et a

gain

st in

tang

ible

ass

ets

only

when

the

actu

al q

uant

ity o

f em

issi

ons

is ap

prov

ed b

y an

app

ropr

iate

regu

lato

ry s

tate

aut

horit

y.

Cha

nges

in th

e va

lue

of li

abilit

y ar

e re

cogn

ised

in th

e pr

ofit

or lo

ss.

Lend

ing

of e

miss

ion

allo

wan

ces

Lend

ing

of e

miss

ion

allo

wanc

es is

a s

ale

trans

actio

n du

ring

whic

h as

sets

is d

ispos

ed a

nd th

e rig

ht to

re

ceive

em

issio

n al

lowa

nces

is a

cqui

red.

The

righ

t to

rece

ive e

miss

ion

allo

wanc

es is

reco

gnis

ed a

s ot

her n

on-c

urre

nt a

sset

s. S

uch

asse

ts a

re in

itial

ly re

cogn

ised

at a

cqui

sitio

n co

st, a

nd s

ubse

quen

tly

such

ass

ets

are

test

ed fo

r im

pairm

ent a

s de

scrib

ed in

Not

e 2.

8.

2.23

Le

ases

Th

e de

term

inat

ion

of w

heth

er a

n ar

rang

emen

t is,

or c

onta

ins

a le

ase

is ba

sed

on th

e su

bsta

nce

of th

e ar

rang

emen

t at i

ncep

tion

date

of w

heth

er th

e fu

lfilm

ent o

f the

arra

ngem

ent i

s de

pend

ent o

n th

e us

e of

a

spec

ific a

sset

or a

sset

s or

the

arra

ngem

ent c

onve

ys a

righ

t to

use

the

asse

t.

Leas

es w

here

sub

stan

tially

all

the

risks

and

rewa

rds

of o

wner

ship

of a

sset

s le

ased

are

tran

sfer

red

to

the

less

ee a

re c

lass

ified

as fi

nanc

e le

ase.

An

oper

atin

g le

ase

is a

leas

e ot

her t

han

a fin

ance

leas

e.

Whe

re th

e C

ompa

ny a

nd (o

r) th

e G

roup

are

less

ors

Fina

nce

leas

es a

re p

rese

nted

as

amou

nts

rece

ivabl

e at

an

amou

nt e

qual

to th

e ne

t inv

estm

ent i

n th

e le

ase;

pay

men

ts re

ceive

d ar

e tre

ated

as

repa

ymen

ts o

f prin

cipl

e an

d fin

ance

inco

me.

Fin

ance

inco

me

is re

cogn

ized

base

d on

a c

onst

ant p

erio

dic

rate

of r

etur

n on

net

inve

stm

ent i

n th

e fin

ance

leas

e.

Ope

ratin

g le

ase

inco

me

is re

cogn

ised

on a

stra

ight

-line

bas

is ov

er th

e le

ase

term

. In

itial

dire

ct c

osts

ar

e ad

ded

to th

e ca

rryin

g am

ount

of t

he a

sset

leas

ed a

nd re

cogn

ised

over

the

leas

e te

rm s

imila

rly a

s le

ase

inco

me.

Whe

re th

e C

ompa

ny a

nd (o

r) th

e G

roup

are

less

ees

Fina

nce

leas

es a

re c

apita

lised

at t

he c

omm

ence

men

t of t

he le

ase

at th

e lo

wer o

f the

fair

valu

e of

the

prop

erty

leas

ed a

nd a

t the

pre

sent

val

ue o

f the

min

imum

leas

e pa

ymen

ts.

Res

pect

ive fi

nanc

e le

ase

liabi

lity

is re

cord

ed in

the

bala

nce

shee

t. Le

ase

paym

ents

are

app

ortio

ned

betw

een

the

finan

ce c

harg

e an

d th

e re

duct

ion

of t

he o

utst

andi

ng li

abilit

y so

as

to p

rodu

ce a

con

stan

t ra

te o

f in

tere

st o

n th

e ou

tsta

ndin

g ba

lanc

e of

the

liabi

lity. F

inan

ce c

harg

es a

re c

harg

ed to

pro

fit o

r los

s.

Paym

ents

mad

e un

der o

pera

ting

leas

es a

re c

harg

ed to

pro

fit o

r los

s on

a s

traig

ht-li

ne b

asis

over

the

perio

d of

the

leas

e.

2.24

G

rant

s an

d su

bsid

ies

Asse

t-rel

ated

gra

nts

Gov

ernm

ent a

nd th

e EU

ass

et-re

late

d gr

ants

com

pris

e gr

ants

rec

eive

d in

the

form

of n

on-c

urre

nt

asse

ts o

r in

the

form

of c

ash

inte

nded

for t

he a

cqui

sitio

n of

non

-cur

rent

ass

ets.

Gra

nts

are

initi

ally

reco

rded

at

the

fair

valu

e of

the

asse

t re

ceive

d an

d su

bseq

uent

ly re

cogn

ised

in p

rofit

or

loss

by

redu

cing

the

depr

ecia

tion

char

ge o

f the

rela

ted

asse

t ove

r the

exp

ecte

d us

eful

life

of th

e as

set.

F-37

245496 Olive pp138-imp 27/06/2017 09:22 Page 37

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

130

AN

NU

AL R

EPO

RT 2

016

|

Upo

n th

e re

valu

atio

n of

non

-cur

rent

ass

ets

gran

ts re

late

d to

non

-cur

rent

ass

ets

in re

spec

t of w

hich

im

pairm

ent w

as re

cogn

ised

on re

valu

atio

n ar

e wr

itten

off.

Inco

me-

rela

ted

gran

ts

Gov

ernm

ent

and

the

Euro

pean

Uni

on g

rant

s re

ceive

d as

a c

ompe

nsat

ion

for

the

expe

nses

or

unea

rned

inco

me

of th

e cu

rrent

or p

revio

us re

porti

ng p

erio

d, a

lso,

all t

he g

rant

s, w

hich

are

not

gra

nts

rela

ted

to a

sset

s, a

re c

onsid

ered

as

gran

ts r

elat

ed t

o in

com

e. T

he i

ncom

e-re

late

d gr

ants

are

re

cogn

ised

as

used

in p

arts

to th

e ex

tent

of t

he e

xpen

ses

incu

rred

durin

g th

e re

porti

ng p

erio

d or

un

earn

ed in

com

e to

be

com

pens

ated

by

that

gra

nt. T

hese

gra

nts

are

pres

ente

d as

a c

redi

t in

the

stat

emen

t of c

ompr

ehen

sive

inco

me.

2.25

D

ivid

end

dist

ribut

ion

Divi

dend

dis

tribu

tion

to th

e C

ompa

ny‘s

sha

reho

lder

s is

reco

gnis

ed a

s a

liabi

lity

in th

e G

roup

‘s a

nd th

e C

ompa

ny‘s

fina

ncia

l sta

tem

ents

in th

e pe

riod

in w

hich

the

divi

dend

s ar

e ap

prov

ed b

y th

e C

ompa

ny‘s

sh

areh

olde

rs.

2.26

C

ontin

genc

ies

Cont

inge

nt li

abilit

ies

are

not r

ecog

nise

d in

the

finan

cial

sta

tem

ents

. The

y ar

e di

sclo

sed

unle

ss th

e po

ssib

ility

of a

n ou

tflow

of r

esou

rces

em

body

ing

econ

omic

bene

fits

is re

mot

e.

A co

ntin

gent

ass

et is

not

reco

gnise

d in

the

finan

cial

sta

tem

ents

but

disc

lose

d wh

en a

n in

flow

of in

com

e or

eco

nom

ic be

nefit

s is

prob

able

.

2.27

Ev

ents

afte

r the

repo

rting

per

iod

All e

vent

s af

ter t

he re

porti

ng p

erio

d (a

djus

ting

even

ts) a

re a

ccou

nted

for i

n th

e fin

ancia

l sta

tem

ents

pr

ovid

ed th

at th

ey a

re re

late

d to

the

repo

rting

per

iod

and

have

a s

igni

fican

t im

pact

on

the

finan

cial

stat

emen

ts. E

vent

s af

ter

the

repo

rting

per

iod

that

are

sig

nific

ant b

ut a

re n

ot a

djus

ting

even

ts a

re

disc

lose

d in

the

note

s to

the

finan

cial s

tate

men

ts.

2.28

R

elat

ed p

artie

s R

elat

ed p

artie

s ar

e de

fined

as

shar

ehol

ders

, hea

ds o

f adm

inist

ratio

n an

d th

eir d

eput

ies,

thei

r clo

se

fam

ily m

embe

rs,

stat

e-ow

ned

ente

rpris

es a

nd c

ompa

nies

tha

t di

rect

ly or

ind

irect

ly (th

roug

h th

e in

term

edia

ry) c

ontro

l the

Gro

up o

r are

con

trolle

d by

, or a

re u

nder

com

mon

con

trol w

ith th

e G

roup

, pr

ovid

ed s

uch

rela

tions

hip

empo

wers

one

of t

he p

artie

s to

exe

rcis

e co

ntro

l or s

igni

fican

t inf

luen

ce o

ver

the

othe

r par

ty in

mak

ing

finan

cial

and

ope

ratin

g de

cisio

ns.

2.29

In

ter-c

ompa

ny o

ffset

ting

Whe

n pr

epar

ing

the

finan

cial

sta

tem

ents

, ass

ets

and

liabi

lities

, as

well

as re

venu

e an

d ex

pens

es a

re

not s

et o

ff, e

xcep

t the

cas

es w

hen

a ce

rtain

IFR

S sp

ecific

ally

requ

ires

such

set

-off.

2.30

Fa

ir va

lue

Fair

valu

e is

def

ined

as

the

price

that

wou

ld b

e re

ceive

d to

sel

l an

asse

t or p

aid

to tr

ansf

er a

liabi

lity in

an

ord

erly

trans

actio

n be

twee

n m

arke

t par

ticip

ants

at t

he m

easu

rem

ent d

ate.

The

re a

re th

ree

leve

ls in

the

fair

valu

e hi

erar

chy:

Leve

l 1: f

air

valu

e of

ass

ets

is ba

sed

on q

uote

d pr

ices

(una

djus

ted)

in a

ctive

mar

kets

for

iden

tical

as

sets

or l

iabi

litie

s.

Leve

l 2: f

air v

alue

of a

sset

s is

base

d on

oth

er o

bser

vabl

e m

arke

t dat

a, d

irect

ly or

indi

rect

ly.

Le

vel 3

: fai

r val

ue o

f ass

ets

is ba

sed

on n

on-o

bser

vabl

e m

arke

t dat

a.

2.31

Se

gmen

t rep

ortin

g O

pera

ting

segm

ents

are

repo

rted

in a

man

ner c

onsis

tent

with

the

inte

rnal

repo

rting

pro

vided

to th

e ch

ief o

pera

ting

decis

ion-

mak

er. T

he c

hief

ope

ratin

g de

cisio

n-m

aker

, who

is re

spon

sibl

e fo

r allo

catin

g re

sour

ces

and

asse

ssin

g pe

rform

ance

of t

he o

pera

ting

segm

ents

, has

bee

n id

entif

ied

as th

e Bo

ard

that

mak

es s

trate

gic

decis

ions

.

2.32

Fi

nanc

ial g

uara

ntee

con

tract

s Th

e co

mpa

ny p

rovi

des

finan

cial

gua

rant

ees

in r

elat

ion

to l

oans

or

othe

r lia

bilit

ies

of

subs

idia

ries

for c

ompe

nsat

ion,

whi

ch is

reco

gnis

ed in

pro

fit a

nd lo

ss o

n ac

crua

l bas

is. T

he

finan

cial

liab

ility

is in

itial

ly m

easu

red

at fa

ir va

lue,

and

sub

sequ

ently

at t

he h

ighe

r of t

he

amou

nt d

eter

min

ed i

n ac

cord

ance

with

IAS

37

Prov

isio

ns,

Con

tinge

nt L

iabi

litie

s an

d C

ontin

gent

Ass

ets

and

the

amou

nt in

itial

ly re

cogn

ised

.

2.33

Pu

t opt

ion

arra

ngem

ents

Th

e gr

oup

has

a wr

itten

put

opt

ion

over

the

equi

ty o

f sub

sidi

ary

Kau

no K

ogen

erac

inė

Jėga

inė

whi

ch

perm

it th

e ho

lder

to p

ut th

eir s

hare

s in

the

subs

idia

ry b

ack

to th

e gr

oup

in a

dea

dloc

k sit

uatio

n at

the

valu

e of

fund

s in

vest

ed (p

erio

d of

con

stru

ctio

n an

d on

e ye

ar a

fter t

he e

nd o

f con

stru

ctio

n) a

nd th

e m

arke

t pric

e (o

ne y

ear a

fter s

tart-

up) l

ess

15 %

. The

am

ount

that

may

bec

ome

paya

ble

unde

r the

op

tion

on e

xerc

ise

is in

itially

reco

gnis

ed a

t the

pre

sent

val

ue o

f the

rede

mpt

ion

amou

nt w

ithin

liabi

lities

wi

th a

cor

resp

ondi

ng c

harg

e di

rect

ly to

non

-con

trollin

g in

tere

st in

equ

ity, T

he li

abilit

y is

subs

eque

ntly

accr

eted

thro

ugh

finan

ce c

harg

es u

p to

the

rede

mpt

ion

amou

nt th

at is

pay

able

at t

he d

ate

at w

hich

th

e op

tion

first

bec

omes

exe

rcis

able

. In

the

even

t tha

t the

opt

ion

expi

res

unex

erci

sed,

the

liabi

lity

is de

reco

gnis

ed w

ith a

cor

resp

ondi

ng a

djus

tmen

t to

equi

ty.

3 Fi

nanc

ial r

isk m

anag

emen

t 3.

1 Fi

nanc

ial r

isk

fact

ors

The

Gro

up a

nd th

e C

ompa

ny a

re e

xpos

ed to

a v

arie

ty o

f fin

ancia

l risk

s in

thei

r ope

ratio

ns: m

arke

t risk

(in

clud

ing

fore

ign

exch

ange

risk

, int

eres

t rat

e ris

k in

rela

tion

to c

ash

flows

), cr

edit

risk

and

liqui

dity

risk

. In

man

agin

g th

ese

risks

the

Gro

up c

ompa

nies

see

k to

mitig

ate

the

impa

ct o

f fac

tors

whi

ch c

ould

ad

vers

ely

affe

ct th

e G

roup

’s a

nd th

e C

ompa

ny’s

fina

ncia

l per

form

ance

resu

lts.

Mar

ket r

isk

Fore

ign

exch

ange

risk

A

s fro

m 1

Jan

uary

201

5, L

ithua

nia

adop

ted

euro

as

its o

ffici

al c

urre

ncy.

Gro

up‘s

/Com

pany

‘s p

urch

ases

an

d sa

les

are

mos

tly d

enom

inat

ed in

eur

os. T

rans

actio

ns d

enom

inat

ed in

oth

er c

urre

ncie

s (U

SD) a

re

insi

gnific

ant a

t the

Gro

up a

nd C

ompa

ny le

vel.

F-38

245496 Olive pp138-imp 27/06/2017 09:22 Page 38

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

131

AN

NU

AL R

EPO

RT 2

016

|

In 2

016,

the

Gro

up c

ompa

nies

did

not

use

any

der

ivativ

e fin

ancia

l ins

trum

ents

inte

nded

to m

anag

e th

e fo

reig

n ex

chan

ge ri

sk.

Inte

rest

rate

risk

Th

e G

roup

’s in

com

e an

d ca

sh fl

ows

are

affe

cted

by

fluct

uatio

ns in

mar

ket i

nter

est r

ates

bec

ause

the

G

roup

’s lo

ans

and

borro

win

gs h

ad fi

xed

and

varia

ble

inte

rest

rat

es a

s of

31

Dec

embe

r 20

16. T

he

Gro

up h

as fi

nanc

ial a

sset

s m

easu

red

amor

tised

cos

ts w

ith fi

xed

inte

rest

rate

s, th

eref

ore,

it is

exp

osed

to

inte

rest

rate

risk

. Th

e fo

llow

ing

tabl

e de

mon

stra

tes

the

sens

itivi

ty o

f the

Gro

up’s

and

the

Com

pany

’s p

rofit

to p

oten

tial

shift

in in

tere

st ra

tes.

Gro

up

In

cre

ase/d

ecre

ase,

perc

en

tag

e p

oin

ts

(Decre

ase)/

incre

ase i

n

pro

fit

20

16

+0.3

/-0.3

(6

3)/6

3 20

15

+0.3

/-0.3

(4

2)/4

2

Co

mp

an

y

Incre

ase/d

ecre

ase,

perc

en

tag

e

po

ints

(D

ecre

ase)/

incre

ase

in p

rofi

t

20

16

+0.3

/-0.3

56

/(56)

20

15

+0.3

/-0.3

51

/(51)

As

at 3

1 D

ecem

ber 2

016

the

Gro

up a

nd th

e C

ompa

ny h

ad v

alid

inte

rest

rat

e sw

aps

(Not

e 26

) tha

t we

re c

oncl

uded

with

the

purp

ose

to m

anag

e in

tere

st ri

sk a

ttrib

utab

le to

long

-term

ban

k lo

ans

(Not

e 19

).

Fair

valu

es o

f fin

ancia

l ins

trum

ents

Th

e C

ompa

ny’s

and

the

Gro

up’s

der

ivat

ive

finan

cial

inst

rum

ents

(Lev

el 1

) , th

e C

ompa

ny’s

and

the

Gro

up’s

ava

ilabl

e-fo

r-sal

e fin

anci

al a

sset

s (L

evel

1),

the

Com

pany

’s a

nd t

he G

roup

’s C

ontin

gent

co

nsid

erat

ions

pay

able

and

rece

ivabl

e on

acq

uisi

tion

of s

ubsi

diar

ies

(Lev

el 3

) are

mea

sure

d at

fair

valu

e. A

ll oth

er fi

nanc

ial a

sset

s an

d fin

anci

al lia

biliti

es a

re re

cogn

ised

initi

ally

at c

ost a

nd s

ubse

quen

tly

mea

sure

d at

am

ortis

ed c

ost,

less

impa

irmen

t los

s.

Fair

valu

e is

def

ined

as

the

price

that

wou

ld b

e re

ceiv

ed to

sel

l an

asse

t or p

aid

to tr

ansf

er a

liabi

lity in

an

ord

erly

trans

actio

n be

twee

n m

arke

t par

ticip

ants

at t

he m

easu

rem

ent d

ate.

Fai

r val

ue is

det

erm

ined

on

the

basis

of q

uote

d m

arke

t pric

es, d

iscou

nted

cas

h flo

w m

odel

s an

d op

tion

prici

ng m

odel

s as

ap

prop

riate

.

The

carry

ing

amou

nt o

f th

e G

roup

's a

nd t

he C

ompa

ny’s

fin

anci

al a

sset

s an

d fin

anci

al l

iabi

litie

s ap

prox

imat

ed th

eir f

air v

alue

exc

ept f

or b

orro

wing

s of

the

Gro

up c

ompa

ny L

ietu

vos

Ener

gijo

s G

amyb

a AB

(Not

e 19

) and

am

ount

s re

ceiva

ble

on d

ispos

al o

f Litg

rid A

B (N

otes

9, 1

3).

As a

t 31

Dec

embe

r 201

6, th

e ca

rryin

g am

ount

of t

he G

roup

's an

d th

e C

ompa

ny's

amou

nts

rece

ivabl

e on

dis

posa

l of L

itgrid

AB

(Not

es 9

, 13)

was

equ

al to

EU

R 2

05,7

93 th

ousa

nd (3

1 D

ecem

ber 2

015:

EUR

23

8,97

5 th

ousa

nd),

and

the

fair

valu

e am

ount

ed to

app

rox.

EU

R 2

03,0

04 th

ousa

nd (3

1 D

ecem

ber

2015

: EU

R 2

47,3

50 th

ousa

nd).

The

fair

valu

e wa

s de

term

ined

on

the

basi

s of

disc

ount

ed c

ash

flows

us

ing

a di

scou

nt ra

te o

f 1,4

3% (3

1 D

ecem

ber 2

015:

1.0

0%).

Thei

r fai

r val

ue is

attr

ibut

ed to

Lev

el 3

in

the

fair

valu

e hi

erar

chy.

The

follo

wing

met

hods

and

ass

umpt

ions

are

use

d to

est

imat

e th

e fa

ir va

lue

of e

ach

clas

s of

fina

ncia

l in

stru

men

ts:

a) T

he c

arry

ing

amou

nt o

f cur

rent

trad

e an

d ot

her r

ecei

vabl

es, c

urre

nt tr

ade

and

othe

r pay

able

s an

d cu

rrent

inte

rest

-bea

ring

borro

wing

s ap

prox

imat

es th

eir f

air v

alue

.

b) T

he fa

ir va

lue

of n

on-c

urre

nt in

tere

st-b

earin

g bo

rrowi

ngs

(incl

udin

g cu

rrent

and

non

-cur

rent

por

tion)

is

estim

ated

by

disc

ount

ing

cont

ract

ual f

utur

e ca

sh fl

ows

at in

tere

st r

ate

esta

blis

hed

base

d on

the

quot

ed m

arke

t pric

e fo

r the

sam

e or

sim

ilar l

oans

or o

n th

e cu

rrent

rate

s av

aila

ble

for d

ebt w

ith th

e sa

me

mat

urity

pro

file. T

he fa

ir va

lue

of th

e m

entio

ned

borro

wing

s, e

xcep

t for

bor

rowi

ngs

of L

ietu

vos

Ener

gijo

s G

amyb

a AB

(Not

e 19

) and

am

ount

s re

ceiva

ble

from

Eps

o-G

UAB

on

sale

of L

itgrid

AB,

ap

prox

imat

es th

eir c

arry

ing

amou

nts.

Cre

dit r

isk

The

Gro

up’s

and

the

Com

pany

’s e

xpos

ure

to c

redi

t ris

k ar

ises

from

ope

ratin

g ac

tivitie

s of

the

co

mpa

nies

(tra

de a

nd o

ther

am

ount

s re

ceiva

ble)

and

fro

m f

inan

cing

act

ivitie

s (c

ash

and

cash

eq

uiva

lent

s, lo

ans

gran

ted)

.

The

Gro

up is

not

exp

osed

to s

igni

fican

t cre

dit r

isk c

once

ntra

tion

rela

ted

to tr

ade

rece

ivabl

es a

nd o

ther

am

ount

s re

ceiva

ble.

Prin

cipa

lly a

ll tra

de re

ceiva

bles

and

oth

er a

mou

nts

rece

ivabl

e of

the

Com

pany

ar

e du

e fro

m re

late

d pa

rties

(see

Not

e 37

). 31

Dec

embe

r 201

6 ot

her r

ecei

vabl

es o

f the

Com

pany

and

th

e G

roup

prin

cipa

lly c

onsi

st o

f the

EPS

O- G

out

stan

ding

rece

ivabl

es fo

r sal

e of

Litg

rid A

B sh

ares

in

2012

(Not

es 4

,9,1

3).

The

prio

rity

obje

ctiv

e of

the

Gro

up’s

and

the

Com

pany

’s tr

easu

ry m

anag

emen

t is

to e

nsur

e se

curit

y of

fu

nds

and

max

imiz

e re

turn

on

inve

stm

ents

in p

ursu

ance

of

this

obje

ctiv

e. R

isk o

f co

unte

rpar

ties

defa

ultin

g is

man

aged

by

ente

ring

into

tran

sact

ions

with

relia

ble

finan

cial

inst

itutio

ns w

ith a

long

-term

cr

edit

ratin

g (in

fore

ign

curre

ncy)

not

low

er th

an ‘A

-‘ ac

cord

ing

to th

e ra

ting

agen

cy F

itch

Rat

ings

(or

an e

quiva

lent

ratin

g of

oth

er ra

ting

agen

cies

).

The

cred

it ris

k on

cas

h in

ban

ks is

limite

d be

caus

e th

e G

roup

and

the

Com

pany

con

duct

tran

sact

ions

wi

th th

e ba

nks

with

hig

h cr

edit

ratin

gs a

ssig

ned

by in

tern

atio

nal c

redi

t rat

ing

agen

cies

. The

Gro

up a

nd

the

Com

pany

hol

d ca

sh b

alan

ces

and

time

depo

sits

in a

ccou

nts

of t

he m

ajor

ban

ks in

Lith

uani

a as

sign

ed w

ith a

long

-term

cre

dit r

atin

g no

t low

er th

an ‘A

-‘ ac

cord

ing

to th

e ra

ting

agen

cy F

itch

Ratin

gs.

F-39

245496 Olive pp138-imp 27/06/2017 09:22 Page 39

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

132

AN

NU

AL R

EPO

RT 2

016

|

The

max

imum

exp

osur

e to

cre

dit r

isk

as a

t 31

Dec

embe

r 201

6 an

d 31

Dec

embe

r 201

5 wa

s eq

ual t

o th

e ca

rryin

g am

ount

of f

inan

cial

ass

ets

and

nom

inal

am

ount

s of

gua

rant

ees.

N

ote

G

rou

p

C

om

pan

y

2016

2015

2016

2015

L

oan

s a

nd

receiv

ab

les:

Trad

e re

ceiva

bles

12

11

1,88

4 10

7,06

6

- -

Fina

ncia

l leas

e 14

9,

590

3,26

2

- -

Amou

nts

rece

ivabl

e on

em

issio

n al

lowa

nces

lent

9

157

214

-

- O

ther

non

-cur

rent

rece

ivabl

es le

ss

impa

irmen

t 9

1,40

9 2,

028

40

-

Accr

ued

reve

nue

for g

as a

nd e

lect

ricity

sa

les

9,13

6,

367

10,8

80

-

- Am

ount

rece

ivabl

e on

revis

ion

of K

auno

en

erge

tikos

rem

onta

s UA

B sh

ares

pric

e 13

-

-

1,06

7 -

Oth

er a

mou

nts

rece

ivabl

e le

ss im

pairm

ent

13

3,61

8 3,

695

1,

016

4,54

9 Lo

an re

ceiva

bles

9,

15

599

29,7

65

7,

802

29,0

00

Amou

nt re

ceiva

ble

on d

ispos

al o

f Litg

rid A

B

9,13

20

5,79

3 20

9,97

5

205,

793

209,

975

A

va

ila

ble

-fo

r-s

ale

fin

an

cia

l a

sse

ts:

Gov

ernm

ent b

onds

15

-

4,53

4

- 4,

534

F

inan

cia

l assets

at

fair

va

lue t

hro

ug

h p

rofi

t o

r lo

ss

De

rivat

ive fi

nanc

ial in

stru

men

ts

26

4,60

6 -

-

-

Cash

and

cas

h eq

uiva

lent

s 16

17

8,56

5 12

2,81

0

73

13,1

79

522,5

88

494,2

29

215,7

91

261,2

64

Off

-bala

nc

e s

he

et

co

mm

itm

en

ts:

Ope

n gu

aran

tees

issu

ed

36

- -

35

,830

67

,430

T

ota

l

522,5

88

494,2

29

251,6

21

328,6

94

Liqu

idity

risk

Th

e liq

uidi

ty r

isk is

man

aged

by

plan

ning

futu

re c

ash

flows

of e

ach

Gro

up c

ompa

ny a

nd e

nsur

ing

suffi

cient

cas

h an

d av

aila

bility

of f

undi

ng th

roug

h co

mm

itted

cre

dit f

acilit

ies

and

over

draf

ts to

sup

port

thei

r ope

ratin

g ac

tiviti

es. T

he re

finan

cing

risk

is m

anag

ed b

y en

surin

g th

at b

orro

wing

s ar

e re

paid

from

av

aila

ble

cash

, fro

m c

ash

flows

exp

ecte

d fro

m o

pera

ting

activ

ities

of t

he G

roup

, and

from

unw

ithdr

awn

com

mitt

ed c

redi

t fac

ilitie

s wh

ich

have

to b

e re

paid

in la

ter p

erio

ds.

As

at 3

1 D

ecem

ber 2

016,

the

Gro

up’s

cur

rent

ratio

(tot

al c

urre

nt a

sset

s / t

otal

cur

rent

liab

ilitie

s) a

nd

quic

k ra

tio (

(tota

l cu

rrent

ass

ets

– in

vent

orie

s) /

tot

al c

urre

nt l

iabi

litie

s) w

ere

1.04

6 an

d 0.

938,

re

spec

tivel

y (3

1 D

ecem

ber 2

015:

1.0

5 an

d 0.

94, r

espe

ctive

ly).

31 D

ecem

ber 2

016

the

Com

pany

's cu

rrent

ratio

(tot

al c

urre

nt a

sset

s / t

otal

cur

rent

liabi

litie

s) w

as 0

.43.

G

iven

that

at

31 D

ecem

ber

2016

, th

e C

ompa

ny’s

bal

ance

of

cred

it an

d ov

erdr

aft

faci

litie

s no

t wi

thdr

awn

amou

nted

to E

UR

71,

052

thou

sand

(Not

e 19

) the

Com

pany

's m

anag

emen

t con

sider

s as

ap

prop

riate

app

licat

ion

of th

e go

ing

conc

ern

prin

cipl

e to

the

Com

pany

's fin

anci

al s

tate

men

ts.

The

guar

ante

e is

sued

by

the

Com

pany

to L

ITG

AS U

AB in

the

amou

nt o

f EU

R 6

7,43

0 th

ousa

nd a

s at

31

Dec

embe

r 201

5 wa

s in

tend

ed to

ser

ve a

s a

secu

rity

unde

r the

cre

dit f

acilit

y ag

reem

ents

sig

ned

by

LITG

AS U

AB w

ith th

e cr

edit

inst

itutio

ns a

nd u

nder

the

long

-term

lique

fied

natu

ral g

as (L

NG

) pur

chas

e ag

reem

ents

sig

ned

with

the

LNG

sup

plie

rs. T

he g

uara

ntee

exp

ired

on 2

3 Fe

brua

ry 2

016.

Th

e C

ompa

ny is

sued

sec

uritie

s an

d gu

aran

tees

in th

e am

ount

of E

UR

35,

830

thou

sand

as

at 3

1 D

ecem

ber 2

016

to s

ecur

e th

e fu

lfilm

ent o

f obl

igat

ions

of t

he G

roup

com

pani

es to

cre

dit i

nstit

utio

ns

and

othe

r cre

dito

rs (n

ote

36).

Th

e ta

ble

belo

w su

mm

arize

s th

e G

roup

‘s a

nd th

e C

ompa

ny’s

fina

ncia

l lia

bilit

ies

by c

ateg

ory:

R

efe

ren

ce to

undis

counte

d c

ash

flo

ws

Gro

up

Co

mp

an

y

2016

2015

2016

2015

F

inan

cia

l liab

ilit

ies m

easu

red

at

am

ort

ised

co

st

Bo

rrowi

ngs

(Not

e 19

) a

493,

918

420,

060

90

,330

-

Fina

nce

leas

e lia

biliti

es

b 47

3 62

8

- -

Non-

curre

nt tr

ade

paya

bles

(Not

e 24

) c

813

1,52

9

- -

Trad

e pa

yabl

es (

Note

25)

d

96,1

18

92,1

19

34

3 44

3 Am

ount

s pa

yabl

e fo

r pro

perty

, pla

nt

and

equi

pmen

t (No

te 2

6)

e 34

,149

31

,994

45

- Cu

rrent

am

ount

s pa

yabl

e fo

r ac

quire

d sh

ares

of s

ubsid

iarie

s (N

ote

26)

f -

-

- 45

,552

Pu

t opt

ion

rede

mpt

ion

liabi

lity

g 4,

481

Oth

er a

mou

nts

paya

ble

and

liabi

lities

(N

ote

26)

h 4,

244

3,42

5

49

361

F

inan

cia

l lia

bilit

ies a

t fa

ir v

alu

e t

hro

ug

h p

rofi

t o

r lo

ss

No

n-cu

rrent

am

ount

s pa

yabl

e fo

r the

ac

quire

d sh

ares

of s

ubsid

iarie

s (N

ote

24)

i -

-

9,27

2 17

,819

De

rivat

ive fi

nanc

ial in

stru

men

ts (N

ote

26)

j 3,

758

-

15

-

Off

-bala

nc

e s

he

et

co

mm

itm

en

ts:

Ope

n gu

aran

tees

issu

ed

k -

-

35,8

30

67,4

30

To

tal

640,0

03

549,8

81

135,8

69

131,6

05

F-40

245496 Olive pp138-imp 27/06/2017 09:22 Page 40

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

133

AN

NU

AL R

EPO

RT 2

016

|

The

tabl

e be

low

sum

mar

izes

the

mat

urity

pro

file

of th

e G

roup

’s a

nd th

e C

ompa

ny’s

fina

ncia

l liab

ilitie

s un

der

the

cont

ract

s (b

ased

on

cont

ract

ual

undi

scou

nted

pay

men

ts o

f in

tere

st-b

earin

g fin

anci

al

liabi

litie

s an

d th

e ca

rryin

g am

ount

s of

oth

er fi

nanc

ial li

abilit

ies)

:

Gro

up

2016

To

tal

Less t

han

3 m

on

ths

3 m

on

ths

to 1

year

1 t

o 5

years

O

ver

5

years

Inte

rest

-bea

ring

borro

wing

s, fi

nanc

e le

ase

and

othe

r lia

biliti

es (

a, b

) 10

,312

12

2,56

5 30

4,17

1

70,0

02

507

,050

Tr

ade

paya

bles

(c, d

) 5

5,45

8

40,

660

8

13

-

96,

931

O

ther

am

ount

s pa

yabl

e (e

-h)

38,

393

4

,481

-

-

4

2,87

4

Deriv

ative

fina

ncia

l inst

rum

ents

(j)

-

3,7

58

-

-

3,7

58

At

31 D

ecem

ber

2016

104,1

63

171,4

64

304,9

84

70,0

02

650,6

13

Gro

up

2015

To

tal

Less t

han

3 m

on

ths

3 m

on

ths

to 1

year

1 t

o 5

years

O

ver

5

years

Inte

rest

-bea

ring

borro

wing

s, fi

nanc

e le

ase

and

othe

r lia

biliti

es (

a, b

) 60

,067

8

7,94

5

224,

223

60

,661

43

2,89

6 Tr

ade

paya

bles

(c, d

) 91

,954

25

5 67

4 76

5 93

,648

O

ther

am

ount

s pa

yabl

e (e

-h)

3

2,50

7

2

,912

-

-

35

,419

De

rivat

ive fi

nanc

ial in

stru

men

ts (i

)

-

-

-

-

-

A

t 31 D

ecem

ber

2015

184,5

28

91,1

12

224,8

97

61,4

26

561,9

63

Co

mp

an

y

2016

To

tal

Less t

han

3 m

on

ths

3 m

on

ths

to 1

year

1 t

o 5

years

O

ver

5

years

Inte

rest

-bea

ring

borro

wing

s, fi

nanc

e le

ase

and

othe

r lia

biliti

es (

a, b

) 69

6 66

,595

11

,531

13

,067

9

1,88

9

Trad

e pa

yabl

es (c

, d)

343

- -

- 3

43

Oth

er a

mou

nts

paya

ble

(e,h

) 45

-

- -

45

Pa

yabl

es fo

r acq

uire

d sh

ares

of

subs

idia

ries

(i)

- -

9,27

2 -

9,2

72

Deriv

ative

fina

ncia

l inst

rum

ents

(j)

- -

15

- 1

5

Ope

n gu

aran

tees

issu

ed (k

) 35

,830

-

- -

35,8

30

At

31 D

ecem

ber

2016

36,9

14

66,5

95

20,8

18

13,0

67

137,3

94

Co

mp

an

y

2015

To

tal

Less t

han

3 m

on

ths

3 m

on

ths

to 1

year

1 t

o 5

years

O

ver

5

years

Inte

rest

-bea

ring

borro

wing

s, fi

nanc

e le

ase

and

othe

r lia

biliti

es (

a, b

) -

- -

- -

Tr

ade

paya

bles

(c, d

) 44

3 -

- -

443

O

ther

am

ount

s pa

yabl

e (e

,g)

361

- -

- 3

61

Paya

bles

for a

cqui

red

shar

es o

f su

bsid

iarie

s (f,

h)

- 45

,552

17

,819

-

63,

371

De

rivat

ive fi

nanc

ial in

stru

men

ts (i

) -

- -

- -

At

viro

s ga

rant

ijos

(k)

67,4

30

- -

- 67

,430

At

31 D

ecem

ber

2015

68,2

34

45,5

52

17,8

19

-

131,6

05

3.2

Cap

ital r

isk

man

agem

ent

Purs

uant

to th

e Li

thua

nian

Law

on

Com

pani

es, t

he a

utho

rised

sha

re c

apita

l of a

pub

lic lim

ited

liabi

lity

com

pany

mus

t be

not l

ess

than

EU

R 4

0 th

ousa

nd, t

he a

utho

rised

sha

re c

apita

l of a

priv

ate

limite

d lia

bilit

y co

mpa

ny m

ust b

e no

t les

s th

an E

UR

2.5

thou

sand

, and

the

shar

ehol

ders

’ equ

ity m

ust b

e no

t lo

wer

than

50%

of t

he c

ompa

ny’s

aut

horis

ed s

hare

cap

ital.

As a

t 31

Dec

embe

r 201

6 an

d 20

15, t

he

Com

pany

and

all

Gro

up c

ompa

nies

, exc

ept f

or E

nerg

etik

ų M

okym

o C

entra

s VŠ

Į (Pu

blic

Inst

itutio

n Tr

aini

ng C

entre

for E

nerg

y Sp

ecia

lists

), co

mpl

ied

with

thes

e re

quire

men

ts. T

he la

tter c

ompa

ny h

as

obta

ined

a c

onfir

mat

ion

from

the

Com

pany

cer

tifyin

g th

at fi

nanc

ial s

uppo

rt wi

ll be

prov

ided

for n

ot le

ss

than

12

mon

ths

afte

r the

app

rova

l of i

ts fi

nanc

ial s

tate

men

ts.

Whe

n m

anag

ing

the

capi

tal r

isk in

a lo

ng ru

n, th

e G

roup

see

ks to

mai

ntai

n an

opt

imal

cap

ital s

truct

ure

of s

ubsid

iarie

s to

ens

ure

a co

nsist

ent i

mpl

emen

tatio

n of

cap

ital c

ost a

nd ri

sk m

inim

izat

ion

obje

ctive

s.

The

Gro

up c

ompa

nies

for

m t

heir

capi

tal s

truct

ure

in v

iew

of in

tern

al f

acto

rs r

elat

ing

to o

pera

ting

activ

ities,

the

expe

cted

cap

ital e

xpen

ditu

res

and

deve

lopm

ents

and

in v

iew

of b

usin

ess

stra

tegy

of t

he

Gro

up c

ompa

nies

, as

well

as b

ased

on

exte

rnal

cur

rent

or e

xpec

ted

fact

ors

sign

ifican

t to

oper

atio

ns

rela

ting

to m

arke

ts, r

egul

atio

n an

d lo

cal e

cono

mic

situ

atio

n.

On

27 D

ecem

ber

2016

, the

Boa

rd o

f Lie

tuvo

s En

ergi

ja U

AB g

roup

app

rove

d a

com

mon

divi

dend

po

licy,

whi

ch s

ets

unifo

rm p

rinci

ples

for t

he p

aym

ent o

f divi

dend

s fo

r all

the

grou

p co

mpa

nies

. The

di

viden

d po

licy

is o

ne o

f ca

pita

l ris

k m

anag

emen

t to

ols.

Bas

ed o

n th

e ne

wly

appr

oved

pol

icy,

di

strib

utio

n of

div

iden

ds p

ropo

sed

by th

e C

ompa

ny a

nd th

e G

roup

com

pani

es w

ill de

pend

on

the

ratio

of

retu

rn o

n eq

uity

and

net

pro

fit e

arne

d. A

ccor

ding

to th

e di

viden

d po

licy,

app

ropr

iatio

n of

pro

fit fo

r th

e pa

ymen

t of d

ivide

nds

for t

he fi

nanc

ial y

ear o

r a p

erio

d sh

orte

r tha

n th

e fin

anci

al y

ear w

ill de

pend

on

the

rat

io o

f re

turn

on

equi

ty,

avai

labi

lity o

f fin

anci

al r

esou

rces

for

the

pay

men

t of

div

iden

ds,

impl

emen

tatio

n of

eco

nom

ic p

roje

cts

impo

rtant

for t

he S

tate

and

oth

er c

ircum

stan

ces.

Bet

ween

60%

an

d 85

% o

f net

pro

fit is

app

ropr

iate

d fo

r the

pay

men

t of d

ivide

nds,

dep

endi

ng o

n th

e ra

tio o

f ret

urn

on

equi

ty a

t the

end

of t

he re

porti

ng p

erio

d. A

com

pany

is n

ot o

blig

ed to

dis

tribu

te d

ivide

nds

when

it in

curs

ne

t los

s. th

e C

ompa

ny a

nd th

e G

roup

com

pani

es w

ill no

t pay

any

divi

dend

s wh

en it

s fin

ancia

l deb

ts

at th

e en

d of

the

repo

rting

per

iod

are

equa

l to

or e

xcee

d fo

ur ti

mes

EBI

TDA

amou

nt fo

r the

last

twel

ve

mon

ths

as fr

om th

e en

d of

the

repo

rting

per

iod.

Div

iden

ds w

ill n

ot b

e pa

id if

a c

ompa

ny’s

equ

ity (a

fter

the

paym

ent o

f divi

dend

s) b

ecom

es lo

wer t

han

the

sum

of i

ts s

hare

cap

ital,

lega

l res

erve

, rev

alua

tion

rese

rve

and

rese

rve

for

acqu

isitio

n of

own

sha

res,

and

also

if

the

Com

pany

and

/or

the

Gro

up

com

pani

es b

ecom

es in

solve

nt o

r wou

ld b

ecom

e in

solve

nt u

pon

paym

ent o

f divi

dend

s. th

e C

ompa

ny

and

the

Gro

up c

ompa

nies

will

also

be

able

not

to p

ay d

ivide

nds

if its

ratio

of f

inan

cial d

ebts

-to-e

quity

be

com

es e

qual

to o

r exc

eeds

1.0

F-41

245496 Olive pp138-imp 27/06/2017 09:22 Page 41

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

134

AN

NU

AL R

EPO

RT 2

016

|

4 C

ritic

al a

ccou

ntin

g es

timat

es a

nd ju

dgem

ents

use

d in

th

e pr

epar

atio

n of

the

finan

cial s

tate

men

ts

Estim

ates

and

judg

emen

ts a

re c

ontin

ually

eva

luat

ed a

nd a

re b

ased

on

hist

orica

l exp

erie

nce

and

othe

r fa

ctor

s, i

nclu

ding

exp

ecta

tions

of

futu

re e

vent

s th

at a

re b

elie

ved

to b

e re

ason

able

und

er t

he

circ

umst

ance

s.

The

prep

arat

ion

of fi

nanc

ial s

tate

men

ts a

ccor

ding

to In

tern

atio

nal F

inan

cial

Rep

ortin

g St

anda

rds

as

adop

ted

by th

e Eu

rope

an U

nion

requ

ires

man

agem

ent t

o m

ake

estim

ates

and

ass

umpt

ions

that

affe

ct

the

repo

rted

amou

nts

of a

sset

s, l

iabi

lities

, in

com

e an

d co

sts

and

cont

inge

ncie

s. C

hang

e in

the

un

derly

ing

assu

mpt

ions

, est

imat

es a

nd ju

dgem

ents

may

hav

e a

mat

eria

l effe

ct o

n th

ese

cons

olid

ated

fin

anci

al s

tate

men

ts o

f the

Gro

up a

nd s

tand

-alo

ne fi

nanc

ial s

tate

men

ts o

f the

Com

pany

.

Rev

alua

tion

of p

rope

rty, p

lant

and

equ

ipm

ent

The

Gro

up a

ccou

nts

for L

and,

Bui

ldin

gs, S

truct

ures

and

mac

hine

ry, M

otor

veh

icle

s, O

ther

pro

perty

, pl

ant a

nd e

quip

men

t and

Con

stru

ctio

n in

pro

gres

s at

reva

lued

am

ount

in a

ccor

danc

e wi

th In

tern

atio

nal

Acc

ount

ing

Stan

dard

16

‘Pro

perty

, pla

nt a

nd e

quip

men

t’.

Rev

alua

tion

of P

rope

rty, p

lant

and

equ

ipm

ent s

tate

d at

reva

lued

am

ount

are

per

form

ed re

gula

rly, u

sing

in

depe

nden

t ap

prai

sers

rev

alua

tions

wh

en t

here

is

indi

catio

n, t

hat

mar

ket

valu

e of

ass

ets

has

chan

ged

signi

fican

tly d

ue to

inte

rnal

or e

xter

nal f

acto

rs.

Rec

ent r

eval

uatio

ns b

y th

e gr

oup

of a

sset

s we

re p

erfo

rmed

:

Gro

up

R

ecen

t re

valu

ati

on

p

erf

orm

ed

La

nd

2013

Bu

ildin

gs

2016

St

ruct

ures

and

mac

hine

ry

2014

M

otor

veh

icle

s 20

14

Oth

er p

rope

rty, p

lant

and

equ

ipm

ent

2014

C

onst

ruct

ion

in p

rogr

ess

2014

In

201

6 th

e G

roup

has

per

form

ed r

eval

uatio

n of

Bui

ldin

gs.

Reva

luat

ions

wer

e pe

rform

ed b

y in

depe

nden

t val

uer u

sing

the

com

para

ble

sale

s pr

ice a

ppro

ach

and

the

inco

me

appr

oach

. Bas

ed o

n re

valu

atio

n re

sults

val

ue in

crea

se o

f EU

R 5

75 th

ousa

nds

was

reco

gnis

ed. D

etai

led

reva

luat

ion

resu

lts

are

disc

lose

d in

Not

e 6.

As

at 3

1 D

ecem

ber 2

016,

oth

er G

roup

ass

ets

stat

ed a

t rev

alue

d am

ount

s we

re n

ot re

valu

ed, b

ecau

se

ther

e we

re n

o in

dica

tions

of a

sig

nific

ant d

iffer

ence

bet

ween

the

net b

ook

amou

nt a

nd m

arke

t val

ue

of a

sset

s st

ated

at r

eval

ued

amou

nt.

In 2

016

the

Gro

up h

as p

erfo

rmed

a s

epar

ate

asse

ssm

ent f

or B

uild

ings

, Stru

ctur

es a

nd m

achi

nery

and

co

nstru

ctio

n in

pro

gres

s s

whic

h ar

e em

ploy

ed in

ele

ctric

ity s

uppl

y an

d di

strib

utio

n ac

tiviti

es p

erfo

rmed

by

sub

sidi

ary

Ener

gijo

s Sk

irsty

mo

Ope

rato

rius,

AB,

i.e.

the

asse

ssm

ent w

heth

er th

ere

is a

n in

dica

tion,

th

at m

arke

t val

ue o

f the

se a

sset

s ha

s ch

ange

d si

gnific

antly

due

to in

tern

al o

r ext

erna

l fac

tors

. The

ca

rryin

g am

ount

of a

sses

sed

asse

ts w

as E

UR 8

49 m

illion

as

at 3

1 De

cem

ber 2

016.

The

fair

valu

e of

th

ese

asse

ts w

as te

sted

by

mak

ing

cash

flow

fore

cast

for t

he p

erio

d un

til 2

056,

bec

ause

the

elec

tricit

y su

pply

activ

ity is

regu

late

d on

the

basi

s of

regu

late

d as

set b

ase,

whi

ch m

ostly

con

sists

of a

sset

s wi

th

long

use

ful l

ife –

ele

ctric

ity lin

es (u

sefu

l life

of 4

0 ye

ars)

.

Key

assu

mpt

ions

use

d in

mak

ing

cash

flow

for

ecas

t in

2016

wer

e as

follo

ws:

1.

Whe

n se

tting

the

price

cap

for e

lect

ricity

dist

ribut

ion

serv

ices

for 2

017

in it

s R

epor

t of 1

4 O

ctob

er

2016

, the

NC

C ap

prov

ed th

e ra

te o

f ret

urn

on in

vest

men

ts e

qual

to 4

.94%

for t

his

perio

d. T

his

rate

is

used

to

dete

rmin

e re

turn

on

inve

stm

ents

for

the

per

iod

2017

–202

0. T

he r

ate

of r

etur

n on

in

vest

men

ts o

f 4.

32%

is a

pplie

d to

the

ent

ire r

emai

ning

cas

h flo

w fo

reca

st p

erio

d (b

ased

on

calc

ulat

ion

data

pub

licly

ava

ilabl

e on

the

NC

C’s

web

site

); 2.

A

pre-

tax

disc

ount

rate

of 5

.53%

was

use

d fo

r disc

ount

ing

cash

flow

s;

3.

Ope

ratin

g ex

pens

es o

f Ene

rgijo

s Sk

irsty

mo

Ope

rato

rius

AB fo

r the

per

iod

2017

–202

5 ar

e pl

anne

d wi

th re

fere

nce

to lo

ng-te

rm p

lans

app

rove

d by

Ene

rgijo

s Sk

irsty

mo

Ope

rato

rius

AB. S

tarti

ng fr

om

2026

, cha

nges

are

pla

nned

in v

iew

of t

he p

roje

cted

chan

ges i

n th

e av

erag

e an

nual

con

sum

er p

rice

inde

x an

d wo

rk p

ay;

4.

Part

of o

pera

ting

expe

nses

incu

rred

by E

nerg

ijos

Skirs

tym

o O

pera

toriu

s AB

is n

ot in

clud

ed in

the

regu

late

d pr

ices

of

dist

ribut

ion

and

supp

ly ac

tiviti

es in

acc

orda

nce

with

the

pro

visio

ns o

f th

e El

ectri

city

Desc

riptio

n;

5.

It is

cons

ider

ed th

at a

dditio

nal p

rofit

will

be e

arne

d du

ring

diffe

rent

regu

lato

ry p

erio

ds a

s a

resu

lt of

the

plan

ned

oper

atio

nal e

ffici

ency

of E

nerg

ijos

Skirs

tym

o O

pera

toriu

s AB

(suc

h po

ssib

ility

is es

tabl

ishe

d by

law)

; 6.

In

vest

men

ts a

re s

hown

for

the

per

iod

2017

–202

0 un

der

the

appr

oved

stra

tegy

of

Ener

gijo

s Sk

irsty

mo

Ope

rato

rius

AB, a

nd fo

r the

per

iod

2021

–202

5 un

der t

he a

ppro

ved

ten-

year

inve

stm

ent

plan

. St

artin

g fro

m 2

026,

inve

stm

ents

are

red

uced

pro

porti

onat

ely

in t

he e

lect

ricity

ope

ratin

g se

gmen

t as

sum

ing

that

all

item

s of

tech

nolo

gica

l ass

ets

that

are

cur

rent

ly de

prec

iate

d or

will

beco

me

depr

ecia

ted

over

the

perio

d un

til 2

055

will

be re

cove

red

until

2055

; 7.

Th

e co

st o

f cap

ital (

retu

rn o

n in

vest

men

ts a

nd d

epre

ciat

ion

of n

on-c

urre

nt a

sset

s) is

cal

cula

ted

and

cons

ider

ed w

hen

dete

rmin

ing

the

price

s of

dist

ribut

ion

serv

ices

for o

ther

regu

lato

ry p

erio

ds in

ac

cord

ance

with

the

long

-run

aver

age

incr

emen

tal c

ost

(LR

AIC)

mod

el a

ppro

ved

by t

he t

he

Com

misi

on;

8.

Poss

ible

pos

itive

cash

flow

s fro

m o

ngoi

ng le

gal d

isput

es w

ere

not i

nclu

ded

in th

e as

sess

men

t by

Ener

gijo

s Sk

irsty

mo

Ope

rato

rius

AB.

Hav

ing

perfo

rmed

the

fair

valu

e te

st, t

he G

roup

con

clud

ed th

at th

ere

woul

d be

an

imm

ater

ial in

crea

se

(up

to 5

%) i

n th

e ca

rryin

g am

ount

of p

rope

rty, p

lant

and

equ

ipm

ent u

sed

in th

e el

ectri

city

supp

ly an

d di

strib

utio

n (E

UR

849

milli

on) a

nd a

ccor

ding

ly d

ecid

ed n

ot to

mak

e an

y ad

just

men

ts to

the

fair

valu

e of

ass

ets.

Sen

sitivi

ty a

nalys

is fo

r the

se a

sset

s as

of 3

1 D

ecem

ber 2

016

is pr

esen

ted

belo

w:

Sens

itivity

ana

lysis

scen

ario

I : E

stab

lishm

ent o

f the

leve

l of r

even

ue a

s fro

m 2

021

and

intro

duct

ion

of

a 10

% lo

wer r

ate

of re

turn

on

inve

stm

ents

equ

al to

3.8

9% b

y th

e C

omm

ision

wou

ld re

sult

in d

ecre

ase

in th

e fa

ir va

lue

of p

rope

rty, p

lant

and

equ

ipm

ent a

s of

31

Dec

embe

r 201

6 do

wn to

EU

R 75

7 m

illion

du

ring

the

fore

cast

per

iod.

Se

nsitiv

ity a

nalys

is sc

enar

io II

: Cha

nges

in th

e cu

rrent

regu

lato

ry e

nviro

nmen

t and

the

Com

misi

on’s

ab

olis

hmen

t of p

ossib

ilitie

s to

gen

erat

e ad

ditio

nal p

rofit

due

to o

pera

tiona

l effi

cien

cy w

ould

resu

lt in

de

crea

se in

the

fair

valu

e of

pro

perty

, pla

nt a

nd e

quip

men

t as

of 3

1 De

cem

ber 2

016

down

to E

UR

832

m

illion

.

Valu

e as

sess

men

t was

also

per

form

ed fo

r Bui

ldin

gs, S

truct

ures

and

mac

hine

ry a

nd c

onst

ruct

ion

in

prog

ress

with

car

ryin

g va

lue

of E

UR

756

milli

on a

s at

31

Dec

embe

r 20

15 w

hich

are

em

ploy

ed in

el

ectri

city

sup

ply

and

dist

ribut

ion

activ

ities

and

no s

igni

fican

t cha

nge

in fa

ir va

lue

was

iden

tifie

d. K

ey

assu

mpt

ions

use

d in

mak

ing

cash

flow

for

ecas

t in

2015

are

des

crib

ed in

sub

sect

ion

“LES

TO A

B an

d Li

etuv

os D

ujos

AB

as a

t 31

Dec

embe

r 201

5”.

The

reva

luat

ion

of M

otor

veh

icle

s wa

s pe

rform

ed in

201

4. S

elec

ted

freig

ht (s

peci

al) m

otor

veh

icles

we

re v

alue

d by

inde

pend

ent v

alua

tor u

sing

the

com

para

ble

price

met

hod,

the

valu

es o

f oth

er fr

eigh

t (s

peci

al) m

otor

veh

icle

s we

re e

stab

lishe

d by

man

agem

ent w

ith re

fere

nce

to v

alue

s de

term

ined

by

the

valu

ator

s. V

alua

tion

of c

ars

was

cond

ucte

d by

man

agem

ent w

ith re

fere

nce

to th

e m

arke

t val

ues.

F-42

245496 Olive pp138-imp 27/06/2017 09:22 Page 42

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

135

AN

NU

AL R

EPO

RT 2

016

|

Impa

irmen

t of p

rope

rty, p

lant

and

equ

ipm

ent c

arrie

d us

ing

the

cost

met

hod

Th

e G

roup

acc

ount

s fo

r G

as d

istrib

utio

n pi

pelin

es, G

as te

chno

logi

cal e

quip

men

t and

inst

alla

tions

, St

ruct

ures

and

mac

hine

ry o

f H

ydro

Pow

er P

lant

, Pu

mpe

d St

orag

e Po

wer

Plan

t, St

ruct

ures

and

m

achi

nery

of T

herm

al P

ower

Pla

nt, W

ind

powe

r pla

nts

and

IT a

nd te

leco

mm

unic

atio

n eq

uipm

ent a

t co

st.

In 2

016

and

2015

the

Gro

up c

onsi

dere

d im

pairm

ent

of p

rope

rty,

plan

t an

d eq

uipm

ent

as

desc

ribed

bel

ow.

a)

Rev

iew

for

impa

irmen

t of

Gas

dist

ribut

ion

pipe

lines

, G

as t

echn

olog

ical

equ

ipm

ent

and

inst

alla

tions

Gas

dist

ribut

ion

pipe

lines

, Gas

tech

nolo

gica

l equ

ipm

ent a

nd in

stal

latio

ns a

re m

anag

ed b

y C

ompa

ny

subs

idia

ry E

nerg

ijos

Skirs

tym

o O

pera

toriu

s, A

B. In

201

6 th

e re

cove

rabl

e am

ount

of t

hese

ass

ets

was

test

ed f

or im

pairm

ent

by m

akin

g ca

sh f

low

fore

cast

for

the

per

iod

until

207

1, b

ecau

se t

he g

as

dist

ribut

ion

activ

ity is

regu

late

d on

the

basis

of r

egul

ated

ass

et b

ase,

whi

ch m

ostly

con

sist

s of

ass

ets

with

long

use

ful li

fe –

gas

pip

elin

es (u

sefu

l life

of 5

5 ye

ars)

. Ke

y as

sum

ptio

ns u

sed

by th

e G

roup

in m

akin

g ca

sh fl

ow fo

reca

st in

201

6 we

re a

s fo

llows

:

1.

Whe

n se

tting

the

price

cap

for n

atur

al g

as d

istrib

utio

n se

rvic

es fo

r 201

4–20

18, t

he C

omm

issio

n ap

prov

ed th

e ra

te o

f ret

urn

on in

vest

men

ts e

qual

to 7

.09%

for t

his

perio

d. T

his

rate

is u

sed

to

dete

rmin

e re

turn

on

inve

stm

ents

for t

he p

erio

d 20

16–2

018.

The

rate

of r

etur

n on

inve

stm

ents

of

4.32

% is

app

lied

to th

e en

tire

rem

aini

ng c

ash

flow

fore

cast

per

iod

(bas

ed o

n ca

lcul

atio

n da

ta

publ

icly

avai

labl

e on

the

Com

misi

on’s

web

site

);

2.

A pr

e-ta

x di

scou

nt ra

te o

f 5.5

3% w

as u

sed

for d

iscou

ntin

g ca

sh fl

ows;

3.

Ope

ratin

g ex

pens

es o

f Ene

rgijo

s Sk

irsty

mo

Ope

rato

rius

AB fo

r the

per

iod

2017

–202

5 ar

e pl

anne

d wi

th re

fere

nce

to lo

ng-te

rm p

lans

app

rove

d by

Ene

rgijo

s Sk

irsty

mo

Ope

rato

rius

AB. S

tarti

ng fr

om

2026

, cha

nges

are

pla

nned

in v

iew

of t

he p

roje

cted

cha

nges

in th

e av

erag

e an

nual

con

sum

er p

rice

inde

x an

d wo

rk p

ay;

4.

Part

of o

pera

ting

expe

nses

incu

rred

by E

nerg

ijos

Skirs

tym

o O

pera

toriu

s AB

is n

ot in

clude

d in

the

regu

late

d pr

ices

of d

istrib

utio

n an

d su

pply

activ

ities

in a

ccor

danc

e wi

th t

he p

rovis

ions

of

the

Com

miss

ion

18 J

uly

2013

res

olut

ion

No.

O3-

316

"Des

crip

tion

of r

equi

rem

ents

on

natu

ral

gas

com

pani

es a

ccou

ntin

g se

para

tion,

cos

t allo

catio

n an

d ac

coun

ting

sepa

ratio

n”;

5.

It is

cons

ider

ed th

at a

dditio

nal p

rofit

will

be e

arne

d du

ring

diffe

rent

regu

lato

ry p

erio

ds a

s a

resu

lt of

th

e pl

anne

d op

erat

iona

l ef

ficie

ncy

of E

nerg

ijos

Skirs

tym

o O

pera

toriu

s AB

(su

ch p

ossib

ility

is es

tabl

ished

in th

e M

etho

dolo

gy);

6.

Inve

stm

ents

are

show

n fo

r the

per

iod

2017

–202

0 un

der t

he a

ppro

ved

stra

tegy

of E

nerg

ijos S

kirst

ymo

Ope

rato

rius

AB, a

nd fo

r the

per

iod

2021

–202

5 un

der t

he a

ppro

ved

ten-

year

inve

stm

ent p

lan.

Sta

rting

fro

m 2

026

until

2071

, inv

estm

ents

are

pla

nned

to b

e m

aint

aine

d at

the

leve

l tha

t exis

ted

in 2

025;

Havin

g co

nsid

ered

all

the

abov

e-m

entio

ned

asse

ts u

sed

in g

as d

istrib

utio

n bu

sines

s, t

he G

roup

co

nclu

ded

that

the

reco

vera

ble

amou

nt o

f pro

perty

, pla

nt a

nd e

quip

men

t use

d in

the

gas

dist

ribut

ion

activ

ities

is hi

gher

than

its

carry

ing

valu

es a

nd th

at n

o im

pairm

ent e

xist a

s of

31

Dece

mbe

r 201

6.

At th

e re

porti

ng d

ate

of 3

1 De

cem

ber 2

015,

the

Gro

up a

lso a

sses

sed

whet

her t

he re

cove

rabl

e am

ount

of

its p

rope

rty, p

lant

and

equ

ipm

ent u

sed

in th

e ga

s di

strib

utio

n ac

tivitie

s is

high

er th

an its

car

ryin

g va

lues

an

d co

nclu

ded

that

no

impa

irmen

t exis

ted

as o

f 31

Dece

mbe

r 201

5. T

he a

sses

smen

t was

bas

ed o

n di

scou

nted

cas

h flo

ws c

alcu

late

d in

acc

orda

nce

with

the

lega

l act

s an

d m

etho

dolo

gies

regu

latin

g th

e di

strib

utio

n an

d su

pply

activ

ities

in f

orce

as

at t

he 3

1 De

cem

ber

2015

as

disc

lose

d in

sec

tion

on

impa

irmen

t tes

t for

sub

sidia

ries,

sub

sect

ion

LEST

O A

B an

d Li

etuv

os D

ujos

AB

as a

t 31

Dec

embe

r 20

15. b)

Re

view

for i

mpa

irmen

t of “

Stru

ctur

es a

nd m

achi

nery

of H

ydro

Pow

er P

lant

, Pum

ped

Stor

age

Pow

er P

lant

” and

“Stru

ctur

es a

nd m

achi

nery

of T

herm

al P

ower

Pla

nt”

Prop

erty

, pl

ant

and

equi

pmen

t cl

asse

s “S

truct

ures

and

mac

hine

ry o

f H

ydro

Pow

er P

lant

, Pu

mpe

d St

orag

e Po

wer

Pla

nt”

and

“Stru

ctur

es a

nd m

achi

nery

of

Ther

mal

Pow

er P

lant

” ar

e m

anag

ed b

y C

ompa

ny’s

sub

sidi

ary

Liet

uvos

Ene

rgijo

s G

amyb

a, A

B

As a

t 31

Dec

embe

r 201

6, th

e G

roup

’s m

anag

emen

t ass

esse

d th

e ex

tern

al fa

ctor

s (c

hang

es in

eco

nom

ic an

d re

gula

tory

env

ironm

ent,

mar

ket c

ompo

sitio

n, in

tere

st ra

tes,

etc

.) an

d th

e in

tern

al fa

ctor

s (c

hang

es in

pu

rpos

e of

use

and

use

ful li

fe o

f ass

ets,

cas

h flo

w ge

nera

tion

capa

city

of a

sset

s, e

tc.)

that

mig

ht im

pact

th

e va

lue

of n

on-c

urre

nt a

sset

s, a

nd d

id n

ot id

entif

y an

y im

pairm

ent i

ndica

tions

in re

spec

t of p

rope

rty,

plan

t and

equ

ipm

ent o

f: 1.

“S

truct

ures

and

mac

hine

ry o

f Hyd

ro P

ower

Pla

nt, P

umpe

d St

orag

e Po

wer

Pla

nt” t

hat i

nclu

des

site

s of

Kr

uonis

Pum

ped

Stor

age

Powe

r Pla

nt a

nd K

auna

s Al

girda

s Br

azau

skas

Hyd

roele

ctric

Pow

er P

lant

; 2.

“S

truct

ures

and

mac

hine

ry o

f Th

erm

al P

ower

Pla

nt”

that

incl

udes

site

s of

Res

erve

Pow

er P

lant

, Co

mbi

ned-

Cycle

Uni

t, th

e ne

w Bi

ofue

l an

d St

eam

Boi

ler

Plan

ts (

here

inaf

ter

colle

ctiv

ely

“the

Elek

trėna

i Com

plex

“).

As a

t 31

Dece

mbe

r 201

6, in

resp

ect o

f ind

ividu

al it

ems

of a

sset

s of

Lie

tuvo

s En

ergi

jos

Gam

yba

AB th

ere

was

reco

gnize

d im

pairm

ent o

f EUR

613

thou

sand

and

reve

rsal

of i

mpa

irmen

t of

EUR

45

thou

sand

. As

at

31 D

ecem

ber

2015

, th

e G

roup

’s m

anag

emen

t te

sted

for

impa

irmen

t th

e pr

oper

ty,

plan

t an

d eq

uipm

ent o

f Kru

onis

Pum

ped

Stor

age

Powe

r Pla

nt a

nd K

auna

s Alg

irdas

Bra

zaus

kas H

ydro

Pow

er P

lant

an

d di

d no

t ide

ntify

any

impa

irmen

t ind

icatio

ns.

In v

iew

of th

e de

cisio

n of

man

agem

ent o

f Lie

tuvo

s En

ergi

jos

Gam

yba

AB o

n di

sman

tling

units

5 a

nd 6

of

the

Rese

rve

Powe

r Pla

nt a

t the

end

of 2

015,

Lie

tuvo

s En

ergi

jos

Gam

yba

AB re

cogn

ised

impa

irmen

t loss

of

EUR

36,

734

thou

sand

equ

al to

the

net b

ook

amou

nt o

f uni

ts 5

and

6 o

f the

Res

erve

Pow

er P

lant

. As

at 3

1 D

ecem

ber 2

015,

impa

irmen

t tes

t was

car

ried

out f

or o

ther

pro

perty

, pla

nt a

nd e

quip

men

t of

“Stru

ctur

es a

nd m

achi

nery

of T

herm

al P

ower

Pla

nt”,

and

impa

irmen

t was

not

iden

tifie

d.

The

“Stru

ctur

es a

nd m

achi

nery

of T

herm

al P

ower

Pla

nt” (

Ele

ktrė

nai C

ompl

ex) i

s tre

ated

as

a si

ngle

ca

sh g

ener

atin

g un

it ba

sed

on th

e fo

llowi

ng:

� Th

e tra

nsm

issio

n sy

stem

ope

rato

r tre

ats

each

pow

er p

lant

as

a sin

gle

gene

ratin

g un

it irr

espe

ctive

of

the

num

ber o

f ind

ividu

al u

nits

that

con

stitu

te th

e po

wer p

lant

; �

All u

nits

of t

he R

eser

ve P

ower

Pla

nt a

nd C

ombi

ned-

Cyc

le U

nit c

an b

e us

ed fo

r bot

h, e

lect

ricity

ge

nera

tion

and

prov

ision

of c

apac

ity r

eser

ve s

ervic

es. T

he s

ituat

ion

of w

hich

uni

t at a

spe

cific

m

omen

t is u

sed

for e

lect

ricity

gen

erat

ion

or la

unch

ing

of c

apac

ity re

serv

e de

pend

s on

the

syst

em‘s

ne

eds,

the

tech

nica

l con

ditio

n of

the

units

(e.g

. sch

edul

ed re

pair

work

s, d

isru

ptio

ns in

ope

ratio

ns

of u

nits

), po

tent

ial d

isrup

tions

in s

uppl

y of

nat

ural

gas

, etc

.; �

Prod

uctio

n of

ele

ctric

ity a

nd t

herm

al p

ower

and

pro

visio

n of

cap

acity

res

erve

ser

vices

at

the

Ele

ktrė

nai C

ompl

ex a

re c

onsi

dere

d to

be

regu

late

d ac

tiviti

es;

F-43

245496 Olive pp138-imp 27/06/2017 09:22 Page 43

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

136

AN

NU

AL R

EPO

RT 2

016

|

� Th

e ne

w Bi

ofue

l and

Ste

am B

oile

r Pla

nts

shar

e th

e sa

me

infra

stru

ctur

e wi

th o

ther

facil

ities

of th

e E

lekt

rėna

i Com

plex

(ele

ctric

ity c

onne

ctio

ns, h

eat n

etw

orks

, oth

er p

ipel

ines

, pum

ps, c

hem

ical b

ar,

etc.

), w

hich

acc

ount

s fo

r the

maj

or p

art o

f all

asse

ts o

pera

ted

by th

e E

lekt

rėna

i Com

plex

. Ste

am

boile

rs h

ave

been

mou

nted

in th

e sa

me

build

ing

as th

e ol

d un

its o

f the

Ele

ktrė

nai C

ompl

ex, a

nd

the

mai

n pu

rpos

e of

use

of t

he b

oile

rs (9

9.3%

of a

sset

s of

the

Stea

m B

oile

r Pla

nt a

re a

ttrib

uted

to

this

are

a) i

s to

act

ivat

e th

e el

ectri

city

gen

erat

ion

units

of

the

Ele

ktrė

nai

Com

plex

fro

m “

cold

” op

erat

ion

mod

e an

d to

gen

erat

e st

eam

ene

rgy

that

is n

eces

sary

to s

uppo

rt th

e in

frast

ruct

ure

of

the

Elek

trėna

i Com

plex

; �

The

new

Biof

uel a

nd S

team

Boi

ler P

lant

s al

so s

uppl

y th

erm

al p

ower

that

is n

eces

sary

to s

uppo

rt th

e in

frast

ruct

ure

of t

he E

lekt

rėna

i Com

plex

and

act

ivat

e th

e el

ectri

city

gen

erat

ion

units

of

the

Ele

ktrė

nai C

ompl

ex;

� W

hen

esta

blis

hing

the

price

s fo

r the

regu

late

d se

rvic

es, t

he N

CC

take

s in

to a

ccou

nt a

ll va

riabl

e an

d fix

ed c

osts

of t

he R

eser

ve P

ower

Pla

nt a

nd C

ombi

ned-

Cyc

le U

nit,

allo

cate

s an

d co

mpe

nsat

es

a pa

rt of

thes

e co

sts

agai

nst c

apac

ity re

serv

e re

venu

e an

d th

e re

mai

ning

par

t aga

inst

the

PSO

fu

nds.

The

ele

ctric

ity b

uy-u

p pr

ice

is e

stab

lishe

d fo

r ele

ctric

ity p

rodu

ced

at th

e El

ektrė

nai C

ompl

ex.

The

Biof

uel a

nd S

team

Boi

ler P

lant

s pr

ovid

e th

e sa

me

serv

ices

as

the

elec

tricit

y ge

nera

tion

units

of

the

Ele

ktrė

nai C

ompl

ex. P

art o

f fix

ed a

nd v

aria

ble

cost

s an

d as

sets

of t

hese

Pla

nts

is al

loca

ted

to P

SO a

nd t

ertia

ry c

apac

ity r

eser

ve s

ervic

es p

rovid

ed b

y el

ectri

city

gen

erat

ion

units

of

the

Ele

ktrė

nai C

ompl

ex. T

he p

rice

of P

SO

and

terti

ary

capa

city

rese

rve

serv

ices

is d

eter

min

ed fo

r the

wh

ole

Elek

trėna

i Com

plex

col

lect

ivel

y ra

ther

than

for i

ndiv

idua

l fac

ilitie

s.

The

reco

vera

ble

amou

nt o

f 3 c

ash

gene

ratin

g un

its w

as e

stim

ated

with

refe

renc

e to

the

valu

e-in

-use

ca

lcul

atio

ns.

Thes

e ca

lcul

atio

ns t

ake

into

acc

ount

the

pre

-tax

cash

flo

w fo

reca

sts

base

d on

the

fin

anci

al b

udge

ts a

ppro

ved

by th

e m

anag

emen

t for

the

perio

d of

five

yea

rs. C

ontin

uous

cas

h flo

w is

estim

ated

usi

ng th

e di

scou

nted

cas

h flo

w in

the

fifth

yea

r.

The

man

agem

ent o

f Lie

tuvo

s En

ergi

jos

Gam

yba

AB e

stim

ated

the

proj

ecte

d op

erat

ing

prof

it in

vie

w of

hist

orica

l dat

a, fo

reca

sts

of p

ositio

n in

the

mar

ket a

nd e

ffect

ive le

gal a

cts.

Ke

y as

sum

ptio

ns u

sed

in p

erfo

rmin

g th

e im

pairm

ent t

est a

s at

31

Dec

embe

r 201

5 we

re a

s fo

llows

: 1.

Th

e va

lue

in u

se w

as e

stim

ated

with

refe

renc

e to

the

mos

t up-

to-d

ate

budg

et fo

r the

yea

r 201

6,

the

finan

cial p

lan

cove

ring

the

perio

d 20

17-2

020,

the

proj

ecte

d pr

e-ta

x di

scou

nted

cas

h flo

ws

usin

g a

pre-

tax

weig

hted

ave

rage

cos

t of c

apita

l (W

ACC

) of 6

.26%

. The

WAC

C wa

s es

timat

ed

with

refe

renc

e to

long

-term

bor

row

ing

cost

in th

e m

arke

t and

the

effe

ctive

ave

rage

Eur

o In

terb

ank

Offe

red

Rate

(EUR

IBO

R);

2.

Cas

h flo

w fo

reca

sts

are

prep

ared

by

the

man

agem

ent a

s a

resu

lt of

fina

ncia

l pro

ject

ions

bas

ed o

n th

e fin

anci

al p

erfo

rman

ce re

sults

, mar

ket d

evel

opm

ent e

xpec

tatio

ns a

nd re

gula

tory

env

ironm

ent.

The

proj

ectio

ns o

f re

venu

e fro

m r

egul

ated

act

iviti

es a

lso

take

int

o ac

coun

t th

e de

prec

iatio

n ex

pens

es o

f pro

perty

, pla

nt a

nd e

quip

men

t and

the

retu

rn o

n in

vest

men

ts, w

hich

is c

alcu

late

d on

th

e va

lue

of a

sset

s us

ed in

the

regu

late

d ac

tivitie

s. W

hen

estim

atin

g th

e re

turn

on

inve

stm

ents

, th

e m

anag

emen

t use

d th

e ra

te o

f ret

urn

on in

vest

men

ts s

et b

y th

e Co

mm

issio

n fo

r the

yea

r 201

6,

whic

h wa

s 5.

35%

.

As a

resu

lt of

the

anal

ysis,

man

agem

ent L

ietu

vos

Ener

gijo

s G

amyb

a AB

det

erm

ined

that

it w

as n

ot

nece

ssar

y to

reco

gnis

e an

y im

pairm

ent l

osse

s as

at 3

1 D

ecem

ber 2

015,

exc

ept f

or th

e im

pairm

ent

loss

es fo

r uni

ts 5

and

6 o

f the

Res

erve

Pow

er P

lant

acc

ount

ed fo

r in

“S

truct

ures

and

mac

hine

ry o

f Th

erm

al P

ower

Pla

nt”.

Had

the

disc

ount

rat

e in

crea

sed

by 0

.5 p

.p. i

n 20

15, t

he v

alue

in u

se o

f the

“S

truct

ures

and

mac

hine

ry o

f The

rmal

Pow

er P

lant

” wou

ld e

xcee

d th

e ca

rryin

g am

ount

.

Impa

irmen

t tes

ts fo

r sub

sidi

arie

s

Alth

ough

the

shar

es o

f the

Com

pany

’s s

ubsi

diar

ies

Ener

gijo

s Sk

irsty

mo

Ope

rato

rius

AB a

nd L

ietu

vos

Ener

gijo

s G

amyb

a AB

are

trad

ed o

n Vi

lniu

s St

ock

Exch

ange

, the

Gro

up's

man

agem

ent b

elie

ves

this

mar

ket i

s no

t act

ive e

noug

h so

that

the

quot

ed s

tock

pric

es c

ould

be

treat

ed a

s eq

uiva

lent

to th

e fa

ir va

lue

of in

vest

men

ts in

sub

sidia

ries

at th

e re

porti

ng d

ate.

Ener

gijo

s Sk

irsty

mo

Ope

rato

rius

AB a

s at

31

Dec

embe

r 201

6

As a

t 31

Dec

embe

r 201

6, im

pairm

ent t

est w

as c

arrie

d ou

t to

dete

rmin

e th

e re

cove

rabl

e va

lue

(bas

ed

on fa

ir va

lue

less

cos

ts o

f disp

osal

) of i

nves

tmen

t in

shar

es o

f Ene

rgijo

s Sk

irsty

mo

Ope

rato

rius

AB

usin

g th

e di

scou

nted

cas

h flo

w m

etho

d. T

he e

stab

lishe

d re

cove

rabl

e va

lue

was

high

er th

an c

ost o

f in

vest

men

t and

as

the

resu

lt im

pairm

ent i

n am

ount

of E

UR

37,

5 m

illion

was

reve

rsed

; the

reve

rsal

is

caus

ed b

y ch

ange

s in

rate

of r

etur

n an

d di

scou

nt ra

te a

s we

ll as

by m

erge

r of t

wo c

ompa

nies

into

one

. In

itial

ly, th

e im

pairm

ent w

as re

cord

ed in

201

4 wi

th re

spec

t of s

hare

s of

LES

TO A

B an

d in

201

5 wi

th

resp

ect p

f sha

res

of L

ietu

vos

Duj

os A

B. A

fter t

he re

vers

al, t

he c

arry

ing

valu

e of

inve

stm

ent (

whic

h is

its a

cqui

sitio

n co

st) e

qual

s EU

R 7

10,9

milli

on (E

UR

673

,6 m

illion

as

at 3

1 D

ecem

ber 2

015)

.

The

disc

ount

ed c

ash

flows

wer

e ca

lcul

ated

in li

ne w

ith th

e le

gal a

cts

and

met

hodo

logi

es re

gula

ting

gas

dist

ribut

ion,

ele

ctric

ity d

istrib

utio

n an

d su

pply

activ

ities

and

effe

ctive

as

at 3

1 D

ecem

ber 2

016.

Th

e im

pairm

ent

test

of

inve

stm

ent

in E

nerg

ijos

Skirs

tym

o O

pera

toriu

s AB

was

per

form

ed b

y th

e C

ompa

ny b

ased

on

the

follo

wing

key

ass

umpt

ions

: 1.

Th

e ca

sh fl

ow fo

reca

st fo

r the

gas

dist

ribut

ion

busin

ess

cove

red

the

perio

d un

til 20

71, b

ecau

se th

e ga

s di

strib

utio

n ac

tivity

is re

gula

ted

on th

e ba

sis o

f the

regu

late

d as

set b

ase,

whi

ch m

ostly

con

sists

of

ass

ets

with

long

use

ful li

fe (5

5 ye

ars)

; a c

ontin

uous

cas

h flo

w ha

s be

en e

stim

ated

bey

ond

the

year

20

71.

2.

The

cash

flow

fore

cast

for t

he e

lect

ricity

dist

ribut

ion

busin

ess

cove

red

the

perio

d un

til 20

56, a

s th

e el

ectri

city

dist

ribut

ion

activ

ity is

regu

late

d on

the

basis

of t

he re

gula

ted

asse

t bas

e, w

hich

mos

tly

cons

ists

of a

sset

s wi

th lo

ng u

sefu

l life

(40

year

s) –

ele

ctric

ity li

nes;

a c

ontin

uous

cas

h flo

w ha

s be

en e

stim

ated

bey

ond

the

year

205

6.

3.

The

rate

of r

etur

n on

inve

stm

ents

for t

he g

as b

usin

ess

was

set b

y th

e N

CC

as

7.09

% fo

r the

yea

rs

2016

-201

8 an

d 4.

32%

for t

he y

ear 2

019

and

beyo

nd, w

hich

was

cal

cula

ted

with

refe

renc

e to

the

com

pone

nts

appr

oved

by

the

NCC.

4.

Th

e ra

te o

f ret

urn

on in

vest

men

ts fo

r the

ele

ctric

ity b

usin

ess

was

set b

y th

e NC

C as

4.9

4% fo

r the

ye

ars

2016

-202

0 an

d 4.

32%

for t

he y

ear 2

021

and

beyo

nd, w

hich

was

cal

cula

ted

with

refe

renc

e to

the

com

pone

nts

appr

oved

by

the

NC

C.

5.

A pr

e-ta

x di

scou

nt ra

te o

f 5.5

3% w

as u

sed

for d

iscou

ntin

g ca

sh fl

ows

6.

O

pera

ting

expe

nses

are

redu

ced

annu

ally

by

4% u

ntil

2025

, and

they

are

no

long

er re

duce

d an

d ar

e in

dexe

d in

202

6 an

d be

yond

. 7.

In

vest

men

ts a

re s

hown

for t

he p

erio

d 20

17–2

025

unde

r the

app

rove

d te

n-ye

ar in

vest

men

t pla

n.

Star

ting

from

202

6, i

nves

tmen

ts r

emai

n st

able

in

the

gas

busi

ness

. D

urin

g 20

26-2

030,

in

vest

men

ts i

n th

e el

ectri

city

bus

ines

s re

mai

n st

able

, an

d as

fro

m 2

031

they

are

red

uced

pr

opor

tiona

tely

to m

atch

LRA

IC.

8.

Poss

ible

pos

itive

cash

flow

s fro

m o

ngoi

ng le

gal d

isput

es w

ere

not i

nclu

ded

by th

e C

ompa

ny in

the

asse

ssm

ent.

The

Com

pany

per

form

ed t

he s

ensi

tivity

ana

lysis

on t

he im

pairm

ent

test

in r

espe

ct o

f ch

ange

s in

un

obse

rvab

le in

puts

: 1.

Th

e ch

ange

s in

disc

ount

rate

s ha

ve a

sig

nific

ant i

mpa

ct o

n th

e re

sult

of v

alua

tion.

The

sen

sitivi

ty

anal

ysis

sho

wed

that

a 0

.5 p

.p. c

hang

e in

dis

coun

t rat

e wo

uld

not r

esul

t in

chan

ge in

reve

rsal

of

impa

irmen

t (at

a d

iscou

nt ra

te o

f 5.0

3%) o

r wou

ld re

sult

in im

pairm

ent o

f EUR

45,

6 m

illion

(at a

di

scou

nt ra

te o

f 6.0

3%).

2.

The

rate

of r

etur

n on

inve

stm

ents

(sta

rting

from

201

9 fo

r the

gas

dist

ribut

ion

busi

ness

and

202

1 fo

r th

e el

ectri

city

sup

ply

and

dist

ribut

ion

busin

ess)

has

a s

igni

fican

t im

pact

on

the

resu

lt of

va

luat

ion.

The

sen

sitivi

ty a

nalys

is sh

owed

that

a 1

p.p

. cha

nge

woul

d re

sult

in im

pairm

ent o

f EUR

46

,3 m

illion

(at a

rate

of r

etur

n of

3.8

2%) o

r wou

ld re

sult

in c

hang

e of

reve

rsal

of i

mpa

irmen

t (at

a

F-44

245496 Olive pp138-imp 27/06/2017 09:22 Page 44

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

137

AN

NU

AL R

EPO

RT 2

016

|

rate

of r

etur

n of

4.8

2%).

If th

e ra

te o

f ret

urn

on in

vest

men

ts d

id n

ot c

hang

e (i.

e. re

mai

n at

7.0

9%

leve

l for

the

gas

busi

ness

sta

rting

from

201

9 an

d at

4.9

4% le

vel f

or th

e el

ectri

city

bus

ines

s st

artin

g fro

m 2

021)

, the

re w

ould

be

no c

hang

es in

the

reve

rsal

of i

mpa

irmen

t. LE

STO

AB

and

Liet

uvos

Duj

os A

B as

at 3

1 D

ecem

ber 2

015

As a

t 31

Dec

embe

r 201

5, th

e C

ompa

ny te

sted

for i

mpa

irmen

t its

inve

stm

ent i

n su

bsid

iary

LES

TO A

B us

ing

the

disc

ount

ed c

ash

flow

met

hod

and

reco

gnis

ed re

vers

al o

f im

pairm

ent o

f EU

R 3

8,9

milli

on,

whic

h la

rgel

y re

sulte

d fro

m c

hang

es i

n th

e re

gula

tory

env

ironm

ent.

Fol

lowi

ng t

he r

ever

sal

of

impa

irmen

t, th

e in

vest

men

t's re

cove

rabl

e am

ount

(whi

ch is

equ

ivale

nt to

its

fair

valu

e) w

as e

qual

to

EUR

522

,0 m

illion

as

at 3

1 D

ecem

ber 2

015.

D

isco

unte

d ca

sh fl

ows

were

cal

cula

ted

in a

ccor

danc

e wi

th th

e fo

llowi

ng le

gal a

cts

and

met

hodo

logi

es

regu

latin

g th

e di

strib

utio

n an

d su

pply

activ

ities,

effe

ctive

as

at 3

1 D

ecem

ber 2

015:

1.

M

etho

dolo

gy fo

r Set

ting

Pric

e C

aps

for E

lect

ricity

Tra

nsm

issi

on, D

istrib

utio

n an

d Pu

blic

Supp

ly Se

rvic

es a

nd P

ublic

Ene

rgy

Pric

e C

aps

(“the

Met

hodo

logy

“) ap

prov

ed b

y th

e C

omm

issi

on’s

R

esol

utio

n N

o O

3-3

of 1

5 Ja

nuar

y 20

15 a

nd a

men

ded

by R

esol

utio

n N

o O

3-57

2 of

29

Oct

ober

20

15;

2.

Des

crip

tion

of th

e R

equi

rem

ents

for A

ccou

ntin

g Se

para

tion

and

Cos

t Allo

catio

n of

Ele

ctric

Pow

er

Sect

or C

ompa

nies

and

Req

uire

men

ts R

elat

ed t

o Ac

coun

ting

Sep

arat

ion

(“th

e D

escr

iptio

n“)

appr

oved

by

the

Com

mis

sion

’s R

esol

utio

n N

o O

3-11

2 of

29

April

201

4 an

d am

ende

d by

R

esol

utio

n N

o O

3-50

7 of

18

Sept

embe

r 201

5;

3.

Met

hodo

logy

for S

ettin

g th

e R

ate

of R

etur

n on

Inve

stm

ents

(“th

e W

AC

C M

etho

dolo

gy“)

appr

oved

by

the

Com

mis

sion

‘s R

esol

utio

n N

o O

3-51

0 of

22

Sept

embe

r 201

5.

The

impa

irmen

t te

st o

f in

vest

men

t in

LES

TO A

B wa

s pe

rform

ed b

y th

e C

ompa

ny b

ased

on

the

follo

wing

key

ass

umpt

ions

: 1.

Th

e ca

sh fl

ow fo

reca

st c

over

ed th

e pe

riod

until

2055

, bec

ause

the

dist

ribut

ion

activ

ity is

regu

late

d on

the

basis

of t

he re

gula

ted

asse

t bas

e, w

hich

mos

tly c

onsis

ts o

f ass

ets

with

long

use

ful l

ife (4

0 ye

ars)

- el

ectri

city

lines

; 2.

W

hen

dete

rmin

ing

the

price

cap

for t

he d

istri

butio

n se

rvic

es fo

r 201

6–20

20 in

Cer

tific

ate

No

O5-

16 o

f 29

Oct

ober

201

5, th

e C

omm

issio

n ap

prov

ed th

e ra

te o

f ret

urn

on in

vest

men

ts e

qual

to 5

.24%

fo

r thi

s pe

riod.

Thi

s ra

te w

as u

sed

to d

eter

min

e th

e re

turn

on

inve

stm

ents

ove

r the

ent

ire c

ash

flow

fore

cast

per

iod;

3.

Th

e ca

sh fl

ows

were

dis

coun

ted

usin

g a

pre-

tax

disc

ount

rate

of 6

.6%

; 4.

LE

STO

AB'

s op

erat

ing

expe

nses

for 2

016–

2020

wer

e pr

ojec

ted

acco

rdin

g to

the

appr

oved

long

-te

rm p

lans

of L

ESTO

AB.

Sta

rting

from

202

1, th

e ch

ange

s we

re e

stim

ated

in v

iew

of th

e fo

reca

st

chan

ges

in th

e av

erag

e an

nual

con

sum

er p

rice

inde

x an

d th

e wo

rk p

ay p

reva

iling

at th

e tim

e of

th

e as

sess

men

t. 5.

Ba

sed

on th

e pr

ovis

ions

of t

he D

escr

iptio

n, a

par

t of o

pera

ting

expe

nses

incu

rred

by L

ESTO

AB

is n

ot in

clud

ed in

the

regu

late

d pr

ices

of th

e di

strib

utio

n an

d su

pply

activ

ity;

6.

It wa

s as

sum

ed th

at in

diff

eren

t reg

ulat

ory

perio

ds a

dditio

nal p

rofit

wou

ld b

e ea

rned

as

a re

sult

of

the

plan

ned

perfo

rman

ce e

ffici

ency

(suc

h po

ssib

ility

is es

tabl

ishe

d in

the

Met

hodo

logy

);

7.

Inve

stm

ents

wer

e pr

ojec

ted

for t

he p

erio

d 20

16–2

025

unde

r the

app

rove

d te

n-ye

ar in

vest

men

t pl

an. S

tarti

ng fr

om 2

026,

inve

stm

ents

wer

e re

duce

d pr

opor

tiona

tely

unde

r the

ass

umpt

ion

that

all

item

s of

tech

nolo

gica

l ass

ets

that

are

cur

rent

ly fu

lly d

epre

ciat

ed o

r will

beco

me

fully

dep

reci

ated

ov

er th

e pe

riod

until

2055

will

be re

cove

red

until

205

5;

8.

LEST

O A

B's

cost

of c

apita

l (re

turn

on

inve

stm

ents

and

dep

reci

atio

n of

non

-cur

rent

ass

ets)

was

ca

lcul

ated

and

take

n in

to a

ccou

nt w

hen

dete

rmin

ing

the

pric

es fo

r ele

ctric

ity d

istrib

utio

n an

d su

pply

serv

ices

for o

ther

regu

lato

ry p

erio

ds, i

n ac

cord

ance

with

the

long

-run

aver

age

incr

emen

tal c

ost

(LR

AIC

) mod

el (h

erei

nafte

r “th

e M

odel

“) an

d in

vie

w o

f par

agra

ph 7

of t

he M

etho

dolo

gy;

9.

The

Com

pany

did

not

tak

e in

to a

ccou

nt t

he p

oten

tial f

avor

able

out

com

es f

rom

the

litig

atio

n pr

oces

ses

(not

e 36

) .

The

Com

pany

per

form

ed t

he s

ensi

tivity

ana

lysis

on t

he im

pairm

ent

test

in r

espe

ct o

f ch

ange

s in

un

obse

rvab

le in

puts

: 1.

Th

e ch

ange

s in

disc

ount

rate

s ha

ve a

sig

nific

ant i

mpa

ct o

n th

e re

sult

of v

alua

tion.

The

sen

sitivi

ty

anal

ysis

show

ed th

at a

0.5

p.p

. cha

nge

in d

iscou

nt ra

te w

ould

resu

lt in

incr

ease

in im

pairm

ent

reve

rsal

up

to E

UR 1

01,9

milli

on (a

t disc

ount

rate

of 6

.10%

) or i

n im

pairm

ent o

f EU

R 1

7,0

milli

on

(at d

iscou

nt ra

te o

f 7.1

0%).

2.

If

for

the

perio

ds s

tarti

ng fr

om 2

021,

the

retu

rn o

n in

vest

men

ts s

et b

y th

e C

omm

issio

n wh

en

dete

rmin

ing

the

reve

nue

leve

l for

LES

TO A

B wa

s 10

% lo

wer (

i.e. e

qual

to 4

.72%

), th

e fo

reca

st

reve

nue

of L

ESTO

AB

(for t

he p

erio

d 20

16-2

055)

wou

ld b

e lo

wer b

y EU

R 3

18 m

illion

. Thi

s wo

uld

resu

lt in

add

itiona

l impa

irmen

t of E

UR 2

3,3

milli

on.

As a

t 31

Dec

embe

r 201

5, th

e C

ompa

ny te

sted

for i

mpa

irmen

t its

inve

stm

ent i

n su

bsid

iary

Lie

tuvo

s D

ujos

AB

usin

g th

e di

scou

nted

cas

h flo

w m

etho

d an

d re

cogn

ised

impa

irmen

t of E

UR

20,

4 m

illion

, wh

ich

larg

ely

resu

lted

from

cha

nges

in th

e re

gula

tory

env

ironm

ent.

The

Com

pany

est

imat

ed th

e fa

ir va

lue

and

valu

e in

use

of

the

inve

stm

ent,

and

dete

rmin

ed t

hat t

he v

alue

in u

se w

as h

ighe

r an

d,

ther

efor

e, t

reat

ed a

s th

e re

cove

rabl

e am

ount

of

the

inve

stm

ent.

Follo

wing

the

im

pairm

ent,

the

reco

vera

ble

amou

nt o

f the

inve

stm

ent w

as e

qual

to E

UR

151

,6 m

illion

as

at 3

1 D

ecem

ber 2

015

(31

Dec

embe

r 201

4: E

UR

174

,8 m

illion

).

For

the

impa

irmen

t tes

t of i

nves

tmen

t in

Liet

uvos

Duj

os A

B, th

e C

ompa

ny u

sed

the

follo

wing

key

as

sum

ptio

ns:

1.

The

valu

e in

use

was

est

imat

ed w

ith re

fere

nce

to th

e fin

anci

al p

lan

cove

ring

the

perio

d 20

16-2

020,

th

e pr

ojec

ted

pre-

tax

disc

ount

ed c

ash

flows

usi

ng a

pre

-tax

weig

hted

ave

rage

cos

t of

cap

ital

(WAC

C) o

f 6.6

0%.

2.

Cas

h flo

w fo

reca

sts

were

pre

pare

d by

the

man

agem

ent in

the

cour

se o

f fin

anci

al p

roje

ctio

ns b

ased

on

th

e fin

anci

al

perfo

rman

ce

resu

lts,

mar

ket

deve

lopm

ent

expe

ctat

ions

an

d re

gula

tory

en

viron

men

t. Th

e pr

ojec

tions

of

reve

nue

from

reg

ulat

ed a

ctiv

ities

als

o to

ok in

to a

ccou

nt t

he

depr

ecia

tion

expe

nses

of p

rope

rty, p

lant

and

equ

ipm

ent a

nd th

e re

turn

on

inve

stm

ents

, whi

ch w

as

calc

ulat

ed o

n th

e va

lue

of a

sset

s us

ed in

the

regu

late

d ac

tivitie

s. W

hen

estim

atin

g th

e re

turn

on

inve

stm

ents

, the

man

agem

ent u

sed

the

rate

of r

etur

n on

inve

stm

ents

set

by

the

Com

miss

ion,

wh

ich

was

7.09

% fo

r the

yea

rs 2

016-

2018

and

5.5

9% fo

r the

yea

r 201

9 an

d be

yond

. 3.

Th

e va

lue

in u

se c

alcu

latio

ns in

clude

d on

ly th

e in

vest

men

ts n

eces

sary

to m

aint

ain

the

curre

nt

asse

t bas

e an

d ap

prov

ed u

nder

the

finan

cial

pla

n, w

here

as th

e fa

ir va

lue

calc

ulat

ions

incl

uded

the

inve

stm

ents

inte

nded

for t

he d

evel

opm

ent a

nd m

oder

niza

tion

of th

e as

set b

ase.

4.

The

fore

cast

cas

h flo

ws w

ere

calcu

late

d wi

th re

fere

nce

to h

istor

ical

dat

a, n

atur

al g

as c

onsu

mpt

ion

fore

cast

s an

d ef

fect

ive le

gal a

cts.

Th

e C

ompa

ny p

erfo

rmed

the

sen

sitiv

ity a

nalys

is on

the

impa

irmen

t te

st in

res

pect

of

chan

ges

in

unob

serv

able

inpu

ts:

1.

The

rate

of r

etur

n on

inve

stm

ents

(sta

rting

from

201

9) h

as a

sig

nific

ant i

mpa

ct o

n th

e re

sult

of

valu

atio

n. T

he s

ensit

ivity

ana

lysis

show

ed t

hat

a 1

p.p.

cha

nge

woul

d re

sult

in i

ncre

ase

in

impa

irmen

t up

to E

UR

35,

4 m

illion

(at r

ate

of re

turn

of 4

.59%

) or d

ecre

ase

in im

pairm

ent d

own

to

EUR

5,4

milli

on (a

t rat

e of

retu

rn o

f 6.5

9%).

If st

artin

g fro

m 2

019

the

rate

of r

etur

n on

inve

stm

ents

di

d no

t cha

nge

(i.e.

rem

ain

at 7

.09%

leve

l), th

e re

cove

rabl

e am

ount

wou

ld b

e eq

uiva

lent

to th

e fa

ir va

lue,

whi

ch w

ould

be

equa

l to

EUR

178

,2 m

illion

(rep

rese

ntin

g EU

R 6

,2 m

illion

sur

plus

of t

he

reco

vera

ble

amou

nt o

ver t

he c

ost o

f inv

estm

ent);

2.

Th

e ch

ange

s in

disc

ount

rat

e al

so h

ave

a si

gnifi

cant

impa

ct o

n th

e re

sult

of v

alua

tion.

The

se

nsitiv

ity a

nalys

is sh

owed

tha

t a

1 p.

p. c

hang

e in

disc

ount

rat

e wo

uld

resu

lt in

incr

ease

in

F-45

245496 Olive pp138-imp 27/06/2017 09:22 Page 45

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

138

AN

NU

AL R

EPO

RT 2

016

|

impa

irmen

t by

up to

EUR

34,

4 m

illion

(at d

iscou

nt ra

te o

f 7.6

0%) o

r dec

reas

e in

impa

irmen

t by

up

to E

UR 1

,9 m

illion

(at d

iscou

nt ra

te o

f 5.6

0%).

Litg

as U

AB

As a

t 31

Dec

embe

r 201

6, th

e C

ompa

ny te

sted

for i

mpa

irmen

t its

inve

stm

ent i

n su

bsid

iary

LIT

GAS

U

AB u

sing

the

disc

ount

ed c

ash

flow

met

hod

and

acco

unte

d fo

r the

reve

rsal

of i

mpa

irmen

t of E

UR

307

th

ousa

nd. F

ollo

wing

the

reve

rsal

of i

mpa

irmen

t, th

e re

cove

rabl

e am

ount

of i

nves

tmen

t (i.e

. its

fair

valu

e) a

mou

nted

to E

UR

11,

856

thou

sand

(31

Dec

embe

r 201

5: E

UR 1

1,54

9 th

ousa

nd).

On

3 O

ctob

er 2

016,

the

Com

pany

acq

uire

d 33

.3%

of s

hare

s of

Litg

as U

AB fr

om K

laip

ėdos

Naf

ta A

B,

and

as a

resu

lt th

e C

ompa

ny‘s

sha

reho

ldin

g in

Litg

as U

AB

is 1

00%

. The

val

ue o

f the

tran

sact

ion

was

ba

sed

on th

e va

luat

ion

repo

rt iss

ued

on 1

8 Au

gust

201

6 by

inde

pend

ent p

rope

rty v

alue

r Del

oitte

Ver

slo

Kons

ulta

cijos

UAB

. As

at 3

1 D

ecem

ber 2

016,

the

Com

pany

acc

ount

ed fo

r 100

% s

hare

hold

ing

in L

itgas

U

AB a

t the

val

ue o

f the

tran

sact

ion

(33.

33%

of s

hare

s we

re a

cqui

red

for E

UR

3,9

52 th

ousa

nd, a

nd

the

valu

e of

100

% s

hare

hold

ing

is EU

R 1

1,85

6 th

ousa

nd).

This

resu

lted

in re

vers

al o

f im

pairm

ent o

f EU

R 3

07 th

ousa

nd a

s at

31

Dec

embe

r 201

6.

As a

t 30

June

201

5, th

e C

ompa

ny te

sted

for i

mpa

irmen

t its

inve

stm

ent i

n su

bsid

iary

Litg

as U

AB u

sing

the

disc

ount

ed c

ash

flow

met

hod.

Disc

ount

ed c

ash

flows

wer

e ca

lcula

ted

in a

ccor

danc

e wi

th t

he

effe

ctive

lega

l act

s an

d m

etho

dolo

gies

regu

latin

g th

e ac

tivity

of t

he d

esig

nate

d su

pplie

r and

taki

ng in

to

cons

ider

atio

n th

e m

ost p

roba

ble

scen

ario

for t

he d

evel

opm

ent o

f the

nat

ural

gas

trad

e ac

tivity

and

un

certa

intie

s ex

istin

g in

the

lique

fied

natu

ral g

as in

dust

ry. D

iscou

nted

cash

flow

s we

re c

alcu

late

d us

ing

a di

scou

nt ra

te o

f 9.7

2%, w

hich

is e

stab

lishe

d as

the

requ

ired

retu

rn o

n th

e sh

are

capi

tal.

As a

resu

lt of

the

anal

ysis,

the

Com

pany

's m

anag

emen

t det

erm

ined

that

the

impa

irmen

t of t

he in

vest

men

t in

Litg

as U

AB w

as e

qual

to E

UR

1,0

92 th

ousa

nd a

s at

30

June

201

5 an

d 31

Dec

embe

r 201

5.

NT V

aldo

s UA

B

As a

t 31

Dec

embe

r 20

16,

the

Com

pany

car

ried

out

impa

irmen

t te

st in

res

pect

of

inve

stm

ent

in

subs

idia

ry N

T Va

ldos

UAB

usi

ng th

e di

scou

nted

cas

h flo

w m

etho

d an

d re

cogn

ised

impa

irmen

t of E

UR

9,0

milli

on,

whic

h wa

s la

rgel

y ca

used

by

prob

able

slo

wdow

n in

fut

ure

grow

th r

ate.

Fol

lowi

ng t

he

reco

gniti

on o

f im

pairm

ent,

the

reco

vera

ble

amou

nt (i

.e. t

he v

alue

in u

se) o

f inv

estm

ent w

as E

UR

80,

3 m

illion

(31

Dec

embe

r 201

5: E

UR

89,

4 m

illion

). Th

e im

pairm

ent t

est o

f inv

estm

ent i

n N

T Va

ldos

UAB

was

per

form

ed b

y th

e C

ompa

ny b

ased

on

the

follo

wing

key

ass

umpt

ions

: 1.

Ac

tual

resu

lts fo

r 201

6 we

re u

sed

in th

e va

luat

ion

as th

e ba

sis fo

r ter

min

al v

alue

cal

cula

tion.

2.

C

ash

flows

wer

e di

scou

nted

at a

dis

coun

t rat

e of

5.8

% (p

ost-t

ax).

3.

Annu

al g

rowt

h ra

te w

as 2

.5%

. Th

e C

ompa

ny p

erfo

rmed

the

sen

sitiv

ity a

nalys

is on

the

impa

irmen

t te

st in

res

pect

of

chan

ges

in

unob

serv

able

inpu

ts:

1.

The

chan

ges

in d

iscou

nt ra

te h

ave

a si

gnific

ant i

mpa

ct o

n th

e re

sult

of v

alua

tion.

The

sen

sitiv

ity

anal

ysis

show

ed th

at a

0.5

p.p

. cha

nge

in d

iscou

nt ra

te w

ould

resu

lt in

no im

pairm

ent (

at a

disc

ount

ra

te o

f 5.3

%) o

r wou

ld re

sult

in in

crea

se in

impa

irmen

t up

to E

UR

22,1

milli

on (a

t a d

iscou

nt ra

te

of 6

.3%

). 2.

Th

e ch

ange

s in

ann

ual g

rowt

h ra

te a

lso

have

a s

igni

fican

t im

pact

on

the

resu

lt of

val

uatio

n. T

he

sens

itivity

ana

lysis

show

ed th

at a

0.5

p.p

. cha

nge

in a

nnua

l gro

wth

rate

wou

ld re

sult

in in

crea

se

in im

pairm

ent u

p to

EU

R 2

2,4

milli

on (a

t a g

rowt

h ra

te o

f 2.0

%) o

r wou

ld re

sult

in n

o im

pairm

ent

(at a

gro

wth

rate

of 3

.0%

).

The

Com

pany

acq

uire

d N

T Va

ldos

UAB

in

2015

and

as

at 3

1 D

ecem

ber

2015

the

re w

ere

no

impa

irmen

t ind

icatio

ns.

Ene

rget

ikos

Pas

laug

ų ir

Ran

gos

Org

aniz

acija

UAB

As

at 3

1 D

ecem

ber 2

016,

the

Com

pany

car

ried

out i

mpa

irmen

t tes

t in

resp

ect o

f its

inve

stm

ent i

n su

bsid

iary

Ene

rget

ikos

Pas

laug

ų ir

Ran

gos

Org

aniz

acija

UAB

due

to it

s wo

rse

resu

lts th

an p

lann

ed

for 2

016.

The

test

was

per

form

ed u

sing

the

disc

ount

ed c

ash

flow

met

hod,

as

the

resu

lt im

pairm

ent o

f EU

R 7

,320

thou

sand

was

reco

gnise

d. F

ollo

wing

the

reco

gnitio

n of

impa

irmen

t, th

e ca

rryin

g va

lue

of

inve

stm

ent w

as E

UR

1,8

17 th

ousa

nd (i

.e. i

ts fa

ir va

lue)

(31

Dec

embe

r 201

5: E

UR 9

,137

thou

sand

). Th

e im

pairm

ent

test

of

inve

stm

ent

in E

nerg

etik

os P

asla

ugų

ir R

ango

s O

rgan

izac

ija U

AB

was

pe

rform

ed b

y th

e C

ompa

ny b

ased

on

the

follo

wing

key

ass

umpt

ions

: 1.

Bu

dget

for 2

017

was

used

in th

e va

luat

ion.

2.

C

ash

flows

wer

e di

scou

nted

at a

dis

coun

t rat

e of

9.8

% (p

ost-t

ax).

3.

Annu

al g

rowt

h ra

te w

as 2

.0%

. Th

e C

ompa

ny p

erfo

rmed

the

sen

sitiv

ity a

nalys

is on

the

impa

irmen

t te

st in

res

pect

of

chan

ges

in

unob

serv

able

inpu

ts:

1.

The

chan

ges

in d

iscou

nt ra

te h

ave

a si

gnific

ant i

mpa

ct o

n th

e re

sult

of v

alua

tion.

The

sen

sitiv

ity

anal

ysis

sho

wed

that

a 1

.0 p

.p. c

hang

e in

disc

ount

rate

wou

ld re

sult

in d

ecre

ase

in im

pairm

ent t

o EU

R 5

.8 m

illion

(at a

disc

ount

rate

of 8

.8%

) or w

ould

resu

lt in

incr

ease

in im

pairm

ent u

p to

EU

R

8.4

milli

on (a

t a d

iscou

nt ra

te o

f 10.

8%).

2.

The

chan

ges

in a

nnua

l gro

wth

rate

als

o ha

ve a

sig

nific

ant i

mpa

ct o

n th

e re

sult

of v

alua

tion.

The

se

nsitiv

ity a

nalys

is sh

owed

that

a 1

.0 p

.p. c

hang

e in

ann

ual g

rowt

h ra

te w

ould

resu

lt in

incr

ease

in

impa

irmen

t up

to E

UR 8

.1 m

illion

(at

a g

rowt

h ra

te o

f 1.0

%)

or w

ould

res

ult i

n de

crea

se in

im

pairm

ent t

o EU

R 6

.3 m

illion

(at a

gro

wth

rate

of 3

.0%

). VA

E SP

B UA

B

As a

t 31

Dec

embe

r 201

6, th

e C

ompa

ny c

arrie

d ou

t im

pairm

ent t

est i

n re

spec

t of i

ts in

vest

men

t in

subs

idia

ry V

AE S

PB U

AB a

nd re

cogn

ised

impa

irmen

t of E

UR 2

01 th

ousa

nd fo

r the

inve

stm

ent (

2015

: EU

R 1

,168

thou

sand

). Fo

llowi

ng th

e re

cogn

ition

of im

pairm

ent,

the

reco

vera

ble

amou

nt (i

.e. t

he fa

ir va

lue)

of i

nves

tmen

t was

EU

R 9

0 th

ousa

nd (3

1 D

ecem

ber 2

015:

EUR

291

thou

sand

). E

nerg

etik

ų M

okym

o C

entra

s Vš

Į

As a

t 31

Dec

embe

r 201

6, th

e C

ompa

ny c

arrie

d ou

t im

pairm

ent t

est i

n re

spec

t of i

ts in

vest

men

t in

subs

idia

ry E

nerg

etik

ų M

okym

ų C

entra

s Vš

Į us

ing

disc

ount

ed c

ash

flow

met

hod

and

reco

gnise

d im

pairm

ent

of E

UR

186

thou

sand

for

the

inve

stm

ent

whic

h wa

s ca

used

wor

se 2

016

resu

lts t

han

plan

ned.

Fol

lowi

ng t

he r

ecog

nitio

n of

impa

irmen

t, th

e re

cove

rabl

e am

ount

(i.e

. th

e fa

ir va

lue)

of

inve

stm

ent w

as E

UR

123

thou

sand

(31

Dec

embe

r 201

5: E

UR

309

thou

sand

). In

vest

men

ts to

oth

er s

ubsi

diar

ies

Ther

e we

re n

o im

pairm

ent i

ndic

ator

s fo

r inv

estm

ents

in o

ther

sub

sidi

arie

s.

F-46

245496 Olive pp138-imp 27/06/2017 09:22 Page 46

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

139

AN

NU

AL R

EPO

RT 2

016

|

Goo

dwill

impa

irmen

t ass

essm

ent "

EUR

AKRA

S"

In 2

016

the

Com

pany

has

acc

ount

ed fo

r EU

R 1

,461

thou

sand

goo

dwill

reco

gnis

ed o

n ac

quisi

tion

of

UAB

EU

RAK

RAS.

The

Com

pany

car

ried

out

good

will

impa

irmen

t te

st,

appl

ying

the

valu

e in

use

m

etho

d. T

est o

f goo

dwill

impa

irmen

t com

plet

ed a

pply

ing

follo

wing

key

ass

umpt

ions

: 1.

C

ash

flow

proj

ectio

n co

mpi

led

for p

erio

d up

to 2

045

as s

tand

ard

oper

atin

g pe

riods

of w

ind

park

s ar

e 3

0 ye

ars;

2.

Pr

oduc

tion

volu

me

is co

nsta

nt a

nd d

eter

min

ed a

ccor

ding

to re

sear

ch o

f win

d pa

rk c

ompl

eted

by

third

-par

ty;

3.

For t

he fi

rst t

welve

yea

rs o

f ope

ratio

n pr

ice

of th

e el

ectri

city

is 7

0.96

EU

R /

MW

h, b

ased

on

the

pref

eren

tial r

ate.

Afte

r the

exp

iry o

f the

pre

fere

ntia

l rat

e pe

riod,

ther

e is

use

d ra

te d

eter

min

ed

acco

rdin

g to

rese

arch

of w

ind

park

com

plet

ed b

y th

ird-p

arty

; 4.

D

isco

untin

g ca

sh fl

ows

appl

ied

5.0

per.

the

disc

ount

rate

(afte

r tax

). R

esul

ts o

f car

ried

out t

est d

o no

t ind

icat

e pr

esen

ce o

f goo

dwill

impa

irmen

t Ju

dgem

ents

rega

rdin

g re

tain

ing

cont

rol o

ver K

auno

Kog

ener

acin

ė Jė

gain

ė O

n 15

Mar

ch 2

016,

the

shar

e ca

pita

l of s

ubsi

diar

y K

auno

Kog

ener

acin

ė Jė

gain

ė (h

erei

nafte

r “K

KJ“)

was

incr

ease

d. F

ollo

wing

the

incr

ease

in s

hare

cap

ital,

the

Com

pany

hol

ds 5

1% o

f sha

res

of K

KJ, a

nd

the

rem

aini

ng 4

9% o

f sha

res

are

held

by

FORT

UM H

EAT

LIET

UVA

UAB

(her

eina

fter F

ORT

UM

).

Both

sha

reho

lder

s ha

ve s

igne

d th

e S

hare

hold

ers’

Agr

eem

ent

unde

r w

hich

key

dec

ision

s ov

er th

e bu

sine

ss s

houl

d be

take

n un

anim

ousl

y by

the

shar

ehol

ders

and

/ or

by

the

Boar

d wh

ich

cons

ist o

f eq

ual n

umbe

r of d

eleg

ates

from

bot

h sh

areh

olde

rs a

nd o

ne in

depe

nden

t mem

ber.

If th

e sh

areh

olde

rs

fail

to re

ach

the

cons

ensu

s on

the

dead

lock

situ

atio

n, th

e C

ompa

ny h

as a

n op

tion

to b

uy (c

all o

ptio

n)

all t

he s

hare

s of

KKJ

hel

d by

FO

RTU

M, w

here

as F

OR

TUM

has

an

optio

n to

sel

l (pu

t opt

ion)

to th

e C

ompa

ny it

s sh

areh

oldi

ng in

KKJ

, the

cal

cula

tion

of re

dem

ptio

n va

lue

is de

fined

in th

e ag

reem

ent.

In

the

Gro

up’s

man

agem

ent v

iew

the

call

optio

n gi

ves

to th

e G

roup

con

trol o

ver K

KJ,

and

cal

l opt

ion’

s st

rike

valu

e ap

prox

imat

es th

e fa

ir va

lue

with

in th

e lim

its o

f the

mat

eria

lity (m

ater

ialit

y thr

esho

ld is

bas

ed

on th

e be

st a

sses

smen

t pra

ctice

s to

+/-

15%

of t

he m

arke

t val

ue))

of th

e pr

ice

to b

e pa

id b

y th

e C

ompa

ny to

FO

RTU

M fo

r buy

out o

f KKJ

sha

res

owne

d by

FO

RTU

M, a

nd th

us g

ives

to th

e G

roup

co

ntro

l ove

r KKJ

. At

31

Dec

embe

r 20

16 th

e G

roup

acc

ount

ed fo

r Eur

4,4

81 th

ousa

nd p

ut o

ptio

n re

dem

ptio

n lia

bility

(N

ote

26) w

hich

is m

easu

red

as n

et p

rese

nt v

alue

of t

he s

ingl

e fu

ture

cas

h ou

tflow

, tha

t will

be p

aid

out t

o FO

RTU

M fo

r KKJ

sha

res

in a

dea

dloc

k si

tuat

ion

if pu

t opt

ion

is re

alis

ed.

Con

tinge

nt c

onsi

dera

tion

on d

ispos

al o

f Litg

rid A

B In

yea

r 201

2 sh

ares

of L

itgrid

AB

held

by

the

Com

pany

wer

e tra

nsfe

rred

to a

new

ly es

tabl

ishe

d pr

ivate

lim

ited

liabi

lity c

ompa

ny E

PSO

-G U

AB in

retu

rn fo

r a c

erta

in c

onsid

erat

ion

base

d on

the

mar

ket v

alue

of

sha

res

esta

blis

hed

by in

depe

nden

t val

uers

. The

inde

pend

ent v

alue

r det

erm

ined

the

mar

ket v

alue

in

resp

ect o

f 97.

5% o

f sha

res

of L

itgrid

AB

usin

g th

e in

com

e ap

proa

ch.

The

purc

hase

-sal

e ag

reem

ent o

f sha

res

of L

itgrid

AB

prov

ides

for a

Con

tinge

nt c

onsi

dera

tion

to th

e fin

al p

rice,

the

amou

nt o

f whi

ch d

epen

ds o

n re

turn

of r

egul

ated

ass

et b

ase

of L

itgrid

AB

in 2

014-

2018

. O

n 24

Sep

tem

ber 2

014

the

Gov

ernm

ent a

ppro

ved

the

Prin

cipl

es fo

r det

erm

inin

g th

e pr

ices

regu

late

d by

the

stat

e in

the

sect

or o

f ele

ctric

ity e

nerg

y an

d on

15

Janu

ary

2015

the

Com

miss

ion

appr

oved

a

new

(LR

AIC)

regu

latio

n m

etho

dolo

gy. O

n 19

Jan

uary

201

5, th

e C

omm

issio

n ap

prov

ed th

e pr

ice

caps

fo

r el

ectri

city

trans

mis

sion

via

hig

h vo

ltage

net

work

s fo

r th

e pe

riod

2016

-202

0. I

n 20

16,

due

to

decr

ease

d ra

te o

f ret

urn

on L

itgrid

AB

regu

late

d as

set b

ase,

as

appr

oved

by

the

Com

miss

ion.

In v

iew

of th

ese

regu

lato

ry c

hang

es, t

he C

ompa

ny a

nd th

e G

roup

ass

esse

d th

e C

ontin

gent

con

side

ratio

n an

d co

nclu

ded

that

acc

ordi

ng to

the

purc

hase

-sal

e ag

reem

ent o

f sha

res

of L

itgrid

AB,

the

Con

tinge

nt

cons

ider

atio

n wa

s ne

gativ

e at

31

Dec

embe

r 20

16 a

nd a

mou

nted

to

EUR

4,1

82 t

hous

and,

at

31

Dec

embe

r 20

15 C

ontin

gent

con

side

ratio

n eq

ual

to z

ero.

In

the

stat

emen

t of

fin

anci

al p

ositio

n

rece

ivabl

e on

disp

osal

on

Litg

rid A

B wa

s re

duce

d as

the

sale

s pr

ice w

as a

djus

ted

by th

e ch

ange

in

the

cont

inge

nt c

onsi

dera

tion.

” (N

ote

9).

Con

tinge

nt c

onsi

dera

tion

is m

easu

red

at le

vel 3

of f

air v

alue

hie

rarc

hy.

The

Com

pany

per

form

ed th

e se

nsitiv

ity a

nalys

is o

f rec

eiva

bles

, for

sal

e of

Litg

rid A

B sh

ares

, in

resp

ect

of c

hang

es in

uno

bser

vabl

e in

puts

. Inv

estm

ent r

ate

of re

turn

in 2

018

has

a sig

nific

ant i

mpa

ct o

n th

e ou

tcom

e of

the

asse

ssm

ent.

Sens

itivity

ana

lysis

show

s th

at:

a)

0.5

p. p

. flu

ctua

tion

woul

d ca

use

nega

tive

valu

e of

EUR

5.6

milli

on w

hen

appl

ied

4.43

% ra

te o

f ret

urn,

or

b)

ze

ro v

alue

whe

n ap

plie

d 5,

43%

rate

of r

etur

n.

Con

tinge

nt c

onsi

dera

tion

for t

he s

hare

s of

NT

Vald

os U

AB

In A

pril

2015

, th

e C

ompa

ny a

cqui

red

the

shar

es o

f N

T Va

ldos

UAB

fro

m L

ESTO

AB,

Lie

tuvo

s En

ergi

jos

Gam

yba

AB, D

uom

enų

Logi

stik

os C

entra

s U

AB

and

Litg

rid A

B, th

ereb

y re

sulti

ng in

100

%

dire

ct c

ontro

l ove

r NT

Vald

os U

AB.

The

Con

tinge

nt c

onsi

dera

tion

to th

e ba

sic

sale

pric

e se

t for

the

acqu

ired

shar

es is

pay

able

by

31

Mar

ch 2

019,

the

amou

nt o

f whi

ch w

ill va

ry d

epen

ding

on

the

finan

cial

per

form

ance

of N

T Va

ldos

UAB

, th

e m

axim

um v

alue

will

be E

UR 1

9,40

0 th

ousa

nd a

nd t

he m

inim

um v

alue

wou

ld e

qual

zer

o. A

t ac

quis

ition

date

, th

e C

ompa

ny a

ccou

nted

the

max

imum

am

ount

of

the

Con

tinge

nt c

onsid

erat

ion

paya

ble

in 2

019,

ie th

e EU

R 1

9,40

0 th

ousa

nd. W

hen

estim

atin

g th

e co

st o

f inv

estm

ents

, the

Com

pany

re

cogn

ised

the

Con

tinge

nt c

onsi

dera

tion

at p

rese

nt v

alue

as

at th

e da

te o

f acq

uisi

tion,

whi

ch w

as

equa

l to

EUR

17,

506

thou

sand

. The

Con

tinge

nt c

onsid

erat

ion

was

disc

ount

ed to

pre

sent

val

ue u

sing

an

ave

rage

inte

rest

rate

set

by

the

Bank

of L

ithua

nia

on b

orro

wing

s in

exc

ess

of E

UR

1,0

00 th

ousa

nd,

whic

h wa

s eq

ual t

o 2.

65%

at t

he d

ate

of a

cqui

sitio

n. A

s at

31

Dec

embe

r 201

6, th

e C

ompa

ny re

viewe

d th

e ac

tual

and

pro

ject

ed p

erfo

rman

ce re

sults

of N

T Va

ldos

UAB

and

con

clud

ed th

at th

e C

ontin

gent

co

nsid

erat

ion

shou

ld b

e re

duce

d, b

ecau

se th

e pe

rform

ance

resu

lts o

f NT

Vald

os U

AB w

ere

not l

ikely

to a

chie

ve th

e le

vel t

hat w

as e

xpec

ted

on in

itial

rec

ogni

tion.

Bas

ed o

n th

e C

ompa

ny’s

est

imat

e, th

e fa

ir va

lue

of C

ontin

gent

con

side

ratio

n fo

r th

e sh

ares

of

NT

Vald

os U

AB a

mou

nted

to E

UR

9,2

57

thou

sand

as

at 3

1 D

ecem

ber 2

016

(31

Dec

embe

r 201

5: E

UR

17,

819

thou

sand

).

Con

tinge

nt c

onsi

dera

tion

is m

easu

red

at le

vel 3

of f

air v

alue

hie

rarc

hy.

Con

tinge

nt c

onsi

dera

tion

for t

he s

hare

s of

Kau

no E

nerg

etiko

s R

emon

tas

UAB

O

n 31

Mar

ch 2

15, t

he C

ompa

ny s

igne

d th

e sh

are

purc

hase

-sal

e ag

reem

ent w

ith L

ietu

vos

Ener

gijo

s G

amyb

a AB

, und

er w

hich

it a

cqui

red

100%

(i.e

. 15,

244,

112)

of o

rdin

ary

regi

ster

ed s

hare

s of

Kau

no

Ener

getik

os R

emon

tas

UAB

. Ka

uno

Ener

getik

os R

emon

tas

UAB

is im

plem

entin

g th

e bi

ofue

l boi

ler p

lant

pro

ject

. If t

he e

xpec

ted

loss

of t

he p

roje

ct in

crea

ses

or d

ecre

ases

by

mor

e th

an E

UR 5

0 th

ousa

nd, t

he p

urch

ase

price

of K

ER

will

adju

sted

dow

nwar

ds o

r upw

ards

, acc

ordi

ngly

by 8

9% o

f the

cha

nge.

As

at 3

1 D

ecem

ber 2

015,

in v

iew

of th

e fa

ct th

at th

e lo

ss fr

om th

e bi

ofue

l boi

ler p

lant

pro

ject

incr

ease

d,

the

Com

pany

's m

anag

emen

t est

imat

ed th

at th

e ac

quisi

tion

cost

of t

he s

hare

s of

Kau

no E

nerg

etiko

s

F-47

245496 Olive pp138-imp 27/06/2017 09:22 Page 47

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

140

AN

NU

AL R

EPO

RT 2

016

|

Rem

onta

s UA

B sh

ould

be

EUR

436

thou

sand

low

er.

The

Com

pany

red

uced

acc

ordi

ngly

the

acqu

isitio

n co

st o

f inv

estm

ent in

Kau

no E

nerg

etiko

s R

emon

tas

UAB

from

EU

R 4

,778

thou

sand

to E

UR

4,34

2 th

ousa

nd.

As a

t 31

Dec

embe

r 201

6, a

loss

was

est

imat

ed o

n th

e im

plem

enta

tion

of th

e Bi

ofue

l Boi

ler H

ouse

Pr

ojec

t and

the

Com

pany

reco

gnise

d EU

R 6

19 th

ousa

nd a

mou

nts

rece

ivabl

e fro

m se

ller f

or th

e sh

ares

(N

otes

13,

31)

.

Con

tinge

nt c

onsi

dera

tion

is m

easu

red

at le

vel 3

of f

air v

alue

hie

rarc

hy.

Use

ful li

ves

of p

rope

rty, p

lant

and

equ

ipm

ent

The

estim

atio

n of

the

usef

ul li

ves

of it

ems

of p

rope

rty, p

lant

and

equ

ipm

ent i

s a

mat

ter o

f jud

gem

ent

base

d on

the

expe

rienc

e wi

th s

imila

r ass

ets.

How

ever

, oth

er fa

ctor

s, s

uch

as te

chni

cal o

r com

mer

cial

obso

lesc

ence

and

phy

sical

wea

r and

tear

, res

ult i

n th

e di

min

utio

n of

the

econ

omic

ben

efits

em

bodi

ed

in t

he a

sset

s. M

anag

emen

t as

sess

es t

he r

emai

ning

use

ful

lives

in a

ccor

danc

e wi

th t

he c

urre

nt

tech

nica

l con

ditio

ns o

f the

ass

ets

and

estim

ated

per

iod

durin

g wh

ich

the

asse

ts a

re e

xpec

ted

to e

arn

bene

fits

for t

he G

roup

. The

follo

wing

key

fact

ors

are

cons

ider

ed:

(a) e

xpec

ted

usag

e of

the

asse

ts;

(b) e

xpec

ted

phys

ical w

ear a

nd te

ar, w

hich

dep

ends

on

oper

atio

nal f

acto

rs a

nd m

aint

enan

ce p

rogr

am;

and

(c) t

echn

ical o

r com

mer

cial o

bsol

esce

nce

arisi

ng fr

om c

hang

es in

mar

ket c

ondi

tions

. Ac

crue

d re

venu

e R

even

ue fr

om h

ouse

hold

cus

tom

ers

is re

cogn

ised

when

met

er d

ata

is de

calre

d an

d pa

ymen

ts a

re

rece

ived.

Acc

ordi

ngly,

at t

he e

nd o

f eac

h re

porti

ng p

erio

d th

e am

ount

of i

ncom

e ea

rned

but

not

yet

pa

id b

y ho

useh

old

cust

omer

s is

est

imat

ed a

nd a

ccru

ed b

y th

e m

anag

emen

t of t

he G

roup

com

pany

op

erat

ing

the

dist

ribut

ion

netw

orks

. Ac

crue

d re

venu

e is

estim

ated

as

1/3

of t

otal

pay

men

ts f

or

elec

trici

ty re

ceive

d in

Dec

embe

r. Ac

crue

d re

venu

e is

base

d on

pas

t exp

erie

nce

and

aver

age

term

of

settl

emen

t for

ele

ctric

ity. T

he m

anag

emen

t has

est

imat

ed th

at th

e m

ajor

ity o

f hou

seho

ld c

usto

mer

s de

clar

e an

d m

ake

paym

ents

for t

he e

lect

ricity

con

sum

ed o

n ap

prox

. the

20t

h da

y of

the

mon

th, w

hile

el

ectri

city

is s

uppl

ied

for a

full

mon

th (3

0 or

31

days

). C

onse

quen

tly, t

he e

lect

ricity

con

sum

ed d

urin

g th

e re

mai

ning

10

days

is p

ropo

rtion

ally

calcu

late

d re

ferri

ng to

the

tota

l vol

ume

of e

lect

ricity

pro

vided

to

the

ele

ctric

ity s

uppl

y ne

twor

k (th

e ac

tual

ly k

nown

var

iabl

e) a

nd t

he t

otal

vol

ume

of e

lect

ricity

de

clar

ed b

y ho

useh

old

cust

omer

s du

ring

Dec

embe

r and

mul

tiplie

d by

the

aver

age

rate

per

1 k

Wh

(Not

e 13

). N

ew c

usto

mer

con

nect

ion

fees

Fe

es p

aid

by c

usto

mer

s re

ceive

d af

ter 1

Jul

y 20

09 fo

r the

con

nect

ion

of n

ew c

usto

mer

s, p

rodu

cers

to

the

elec

tricit

y ne

twor

k an

d fo

r the

dis

loca

tion

or re

cons

truct

ion

of e

lect

ricity

net

work

obj

ects

or f

acilit

ies

upon

the

requ

est o

f the

cus

tom

er, p

rodu

cer

or a

ny o

ther

ent

ity, a

re r

ecog

nise

d as

rev

enue

upo

n co

nnec

tion

of c

usto

mer

. Th

e ab

ove-

men

tione

d fe

es re

ceive

d be

fore

1 J

uly

2009

wer

e in

itial

ly re

cogn

ised

as

defe

rred

reve

nue

and

subs

eque

ntly

reco

gnise

d as

reve

nue

on a

pro

porti

onat

e ba

sis o

ver t

he u

sefu

l life

of t

he re

late

d ne

wly

crea

ted

prop

erty

, pla

nt a

nd e

quip

men

t. Th

e re

late

d co

sts

com

prisi

ng th

e ac

quisi

tion

cost

of

prop

erty

, pla

nt a

nd e

quip

men

t and

oth

er c

osts

wer

e ca

pita

lised

and

are

dep

reci

ated

ove

r the

est

imat

ed

usef

ul li

fe o

f the

ass

ets

capi

talis

ed.

Paym

ents

mad

e by

cus

tom

ers

for

the

conn

ectio

n to

the

Com

pany

's ga

s sy

stem

are

rec

orde

d as

ac

crue

d de

ferre

d re

venu

e in

the

stat

emen

t of f

inan

cial

pos

ition

and

reco

gnis

ed a

s re

venu

e ov

er th

e

usef

ul li

fe o

f the

cap

italis

ed p

rope

rty, p

lant

and

equ

ipm

ent c

once

rned

. Suc

h re

venu

e is

show

n un

der

the

line

item

'Sal

es re

venu

e' in

the

stat

emen

t of c

ompr

ehen

sive

inco

me.

Ac

coun

ting

met

hods

app

lied

to a

ccou

nt fo

r fe

es p

aid

by n

ew c

usto

mer

s fo

r th

e co

nnec

tion

to th

e el

ectri

city

and

gas

sys

tem

diff

er d

epen

ding

on

the

prici

ng o

f the

se s

ervic

es:

- th

e fe

e fo

r th

e co

nnec

tion

to t

he e

lect

ricity

net

work

is d

eter

min

ed o

n th

e ba

sis

of f

ees

and

met

hodo

logi

es a

ppro

ved

by th

e Li

thua

nian

lega

l act

s an

d re

gula

tory

aut

horit

ies;

the

serv

ice

is de

emed

to b

e pr

ovid

ed u

pon

the

conn

ectio

n of

the

cust

omer

to th

e el

ectri

city

net

work

; -

the

fee

for t

he c

onne

ctio

n of

non

-hou

seho

ld c

usto

mer

s to

the

gas

syst

em is

det

erm

ined

on

the

basi

s of

fees

and

met

hodo

logi

es a

ppro

ved

by th

e Li

thua

nian

lega

l act

s an

d re

gula

tory

aut

horit

ies,

ho

weve

r, th

e co

nnec

tion

agre

emen

t of t

he c

usto

mer

who

con

nect

s a

new

natu

ral g

as s

yste

m

stip

ulat

es a

min

imum

qua

ntity

of g

as to

be

trans

porte

d via

a n

on-h

ouse

hold

cus

tom

er o

r ne

w na

tura

l gas

sys

tem

and

the

min

imum

cap

acitie

s wh

ich

ensu

re t

hat t

he n

ew c

usto

mer

or

new

natu

ral g

as s

yste

m c

onne

cted

doe

s no

t inc

reas

e th

e pr

ice c

ap fo

r the

exis

ting

cust

omer

s, a

s we

ll as

the

proc

edur

e fo

r cal

cula

ting

a fe

e fo

r the

min

imum

qua

ntitie

s of

gas

to b

e tra

nspo

rted

by a

no

n-ho

useh

old

cust

omer

or n

atur

al g

as s

yste

m a

nd fo

r the

min

imum

cap

aciti

es a

nd th

e pe

riodi

city

of p

aym

ents

if a

new

cus

tom

er c

onne

ctin

g a

new

natu

ral g

as s

yste

m tr

ansp

orts

lowe

r qua

ntitie

s or

ord

ers

lowe

r cap

acitie

s th

an th

ose

spec

ified

in th

e ne

w cu

stom

er c

onne

ctio

n ag

reem

ent.

Whe

n ap

prov

ing

the

conn

ectio

n fe

es fo

r hou

seho

ld n

atur

al g

as c

usto

mer

s, th

e N

CC

ass

esse

s th

e re

turn

on

inve

stm

ents

inte

nded

for t

he co

nnec

tion

of n

ew p

rice

cap

leve

l of n

atur

al g

as d

istrib

utio

n sy

stem

(in

vest

men

ts s

houl

d no

t exc

eed

the

curre

nt p

rice

cap)

und

er th

e sa

me

prin

ciple

as

that

use

d fo

r no

n-ho

useh

old

natu

ral g

as c

usto

mer

s, y

et n

ot o

n in

divid

ual c

usto

mer

-by-

cust

omer

bas

is, b

ut b

y es

tabl

ishin

g a

conn

ectio

n fe

e co

llect

ivel

y. In

this

case

, the

ser

vice

prov

ided

to n

on-h

ouse

hold

and

ho

useh

old

cust

omer

is c

ontin

uous

in n

atur

e an

d it

rela

tes

to c

ontra

ctua

l obl

igat

ions

and

futu

re

cons

umpt

ion

leve

ls, a

nd th

eref

ore,

reve

nue

is sp

lit ov

er th

e de

prec

iatio

n pe

riod

of p

rope

rty, p

lant

an

d eq

uipm

ent c

once

rned

. Im

pairm

ent o

f am

ount

s re

ceiva

ble

Impa

irmen

t los

ses

for a

mou

nts

rece

ivabl

es a

re d

eter

min

ed b

ased

on

the

man

agem

ent’s

est

imat

es o

n re

cove

rabi

lity

and

timin

g re

latin

g to

the

amou

nts

that

will

not b

e co

llect

able

acc

ordi

ng to

the

orig

inal

te

rms

of re

ceiva

bles

. Thi

s de

term

inat

ion

requ

ires s

igni

fican

t judg

emen

t. Ju

dgem

ent is

exe

rcis

ed b

ased

on

sig

nific

ant f

inan

cial

diff

icultie

s of

the

debt

or, p

roba

bilit

y th

at th

e de

btor

will

ente

r ba

nkru

ptcy

or

finan

cial

re

orga

nisa

tion,

an

d de

faul

t or

de

linqu

ency

in

pa

ymen

ts.

Cur

rent

es

timat

es

of

the

man

agem

ent

coul

d ch

ange

sig

nific

antly

as

a re

sult

of c

hang

e in

situ

atio

n in

the

mar

ket

and

the

econ

omy

as a

who

le. R

ecov

erab

ility

rate

als

o hi

ghly

depe

nds

on s

ucce

ss ra

te a

nd a

ctio

ns e

mpl

oyed

re

latin

g to

reco

very

of s

igni

fican

tly o

verd

ue a

mou

nts

rece

ivabl

e.

Amou

nts

rece

ivabl

e ar

e as

sess

ed to

det

erm

ine

thei

r val

ue a

nd im

pairm

ent i

ndivi

dual

ly or

col

lect

ivel

y in

a g

roup

of s

imila

r rec

eiva

bles

. In

case

of in

divid

ually

ass

esse

d re

ceiva

bles

for i

mpa

irmen

t, th

e G

roup

ta

kes

into

acc

ount

the

avai

labl

e or

acc

essi

ble

data

from

ext

erna

l sou

rces

of i

nfor

mat

ion

on m

arke

t tre

nds

and

fore

cast

s, t

he p

ossib

le c

redi

t en

hanc

emen

ts (

colla

tera

l) pr

ovid

ed f

or r

ecei

vabl

es a

nd

even

ts p

rovid

ing

evid

ence

of i

mpa

irmen

t of r

ecei

vabl

es s

uch

as, f

or e

xam

ple,

fulfil

men

t of c

ontra

ctua

l te

rms,

the

bor

rowe

r's a

ctua

l pe

rform

ance

, et

c. I

n ca

se o

f co

llect

ivel

y as

sess

ed r

ecei

vabl

es f

or

impa

irmen

t, th

e G

roup

take

s in

to a

ccou

nt th

e hi

stor

ical s

tatis

tics,

and

revie

ws a

nnua

lly w

heth

er th

e pr

ovis

ioni

ng r

ates

use

d fo

r co

llect

ivel

y as

sess

ed r

ecei

vabl

es a

re in

line

with

the

hist

oric

al d

ata

of

impa

irmen

t of r

ecei

vabl

es, a

nd th

at th

e pr

ovis

ioni

ng ra

tes

used

for c

olle

ctiv

ely

asse

ssed

rece

ivabl

es

are

appr

oved

for t

he u

pcom

ing

year

.

F-48

245496 Olive pp138-imp 27/06/2017 09:22 Page 48

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

141

AN

NU

AL R

EPO

RT 2

016

|

Accr

ued

reve

nue

from

PSO

and

cap

acity

rese

rve

serv

ice

fees

Pa

rt of

fund

s fo

r PS

O a

nd te

rtiar

y ca

pacit

y re

serv

e se

rvic

es a

re a

lloca

ted

for

the

mai

nten

ance

of

infra

stru

ctur

e of

the

Ele

ktrė

nai C

ompl

ex a

nd f

or t

he c

ompe

nsat

ion

of t

he n

eces

sary

tria

l cos

ts o

f el

ectri

city

gen

erat

ion

faci

litie

s. In

frast

ruct

ure

mai

nten

ance

cos

ts c

over

fuel

, em

issi

on a

llowa

nce

and

othe

r pr

oduc

tion

cost

s th

at a

re in

curre

d in

the

cour

se o

f gen

erat

ion

of h

eat w

hich

is n

eces

sary

to

supp

ort

infra

stru

ctur

e, a

s we

ll in

the

cou

rse

of g

ener

atio

n el

ectri

city

whi

ch i

s co

nsum

ed b

y th

e E

lekt

rėna

i Com

plex

, and

gas

con

sum

ptio

n ca

paci

ty ta

xes.

Allo

cate

d am

ount

of P

SO

fund

s an

d th

e pr

ice

for c

apac

ity re

serv

e se

rvice

s ar

e G

roup

. In

the

Gro

up’s

fina

ncia

l sta

tem

ents

, inc

ome

from

thes

e se

rvic

es is

reco

gnis

ed o

n ac

crua

l bas

is ba

sed

on a

ctua

lly in

curre

d co

sts.

A

s at

31

Dec

embe

r 201

6, th

e G

roup

reco

gnis

ed P

SO

fund

s of

EU

R 9

,404

thou

sand

with

in ‘O

ther

non

-cu

rrent

am

ount

s pa

yabl

e an

d lia

bilit

ies’

(N

ote

24) t

o be

refu

nded

in 2

018

(31

Dec

embe

r 201

5: P

SO

fund

s of

EUR

7,0

18

thou

sand

to b

e re

fund

ed in

201

7).

PSO

fun

ds o

f EUR

177

thou

sand

to

be

refu

nded

in 2

017

aros

e fro

m lo

wer

than

est

ablis

hed

actu

al fi

xed

and

varia

ble

cost

s in

curre

d in

the

prov

isio

n of

regu

late

d se

rvic

es. A

s at

31

Dec

embe

r 201

6, n

on-c

urre

nt a

mou

nt p

ayab

le w

as c

arrie

d at

am

ortis

ed c

ost u

sing

the

effe

ctive

inte

rest

rate

app

roac

h. W

hen

disc

ount

ing

the

paya

ble

PSO

fund

s du

ring

the

perio

d of

refu

ndin

g, a

disc

ount

rate

of 1

.02%

was

use

d, a

nd d

iscou

ntin

g ef

fect

of E

UR

185

th

ousa

nd w

as re

cogn

ised

with

in ‘O

ther

fina

ncia

l inc

ome’

.

F-49

245496 Olive pp138-imp 27/06/2017 09:22 Page 49

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

142

AN

NU

AL R

EPO

RT 2

016

|

5 In

tang

ible

ass

ets

Gro

up

P

ate

nts

an

d

lic

en

ses

Co

mp

ute

r so

ftw

are

E

mis

sio

n

all

ow

an

ces

Oth

er

inta

ng

ible

assets

G

oo

dw

ill

To

tal

At

31 D

ecem

ber

2014

Acqu

isitio

n co

st

2,89

1 9,

395

10,5

31

526

- 23

,343

Ac

cum

ulat

ed a

mor

tisat

ion

(1,5

35)

(6,1

94)

- (2

80)

- (8

,009

) N

et

bo

ok a

mo

un

t 1,3

56

3,2

01

10,5

31

246

- 15,3

34

Net

bo

ok a

mo

un

t at

31 D

ecem

ber

2014

1,3

56

3,2

01

10,5

31

246

- 15,3

34

Addi

tions

87

40

3 -

2,19

1 -

2,68

1 R

ecla

ssifie

d to

/from

PP&

E ca

tego

ries

1 1,

501

- (1

,423

) -

79

Writ

e-of

fs

- (9

1)

- -

- (9

1)

Emiss

ion

allo

wanc

es u

tilise

d (N

ote

23)

- -

(2,9

92)

- -

(2,9

92)

Rev

alua

tion

of e

miss

ion

allo

wanc

es

- -

2,14

4 -

- 2,

144

Ret

urn

of e

mis

sion

allo

wanc

es le

nt

- -

4,61

5 -

- 4,

615

Gra

nt re

ceive

d on

em

issio

n al

lowa

nces

-

- 2,

140

- -

2,14

0 Am

ortis

atio

n ch

arge

(5

92)

(1,7

46)

- (3

3)

- (2

,371

) N

et

bo

ok a

mo

un

t at

31 D

ecem

ber

2015

852

3,2

68

16,4

38

981

- 21,5

39

At

31 D

ecem

ber

2015

Acqu

isitio

n co

st

2,83

6 10

,760

16

,438

1,

259

- 31

,293

Ac

cum

ulat

ed a

mor

tisat

ion

(1,9

84)

(7,4

92)

- (2

78)

- (9

,754

) N

et

bo

ok a

mo

un

t 852

3,2

68

16,4

38

981

- 21,5

39

Net

bo

ok a

mo

un

t at

31 D

ecem

ber

2015

852

3,2

68

16,4

38

981

- 21,5

39

Incr

ease

on

acqu

isiti

on o

f sub

sidi

arie

s (N

ote

33)

14,9

00

- -

- 1,

461

16,3

61

Addi

tions

44

58

8 9

2,47

0 -

3,11

1 R

ecla

ssifie

d to

/from

PP&

E ca

tego

ries

1,03

1 1,

544

- (2

,442

) -

133

Emiss

ion

allo

wanc

es u

tilise

d (N

ote

23)

- -

(2,9

99)

- -

(2,9

99)

Reva

luat

ion

of e

miss

ion

allo

wanc

es

- -

(3,3

46)

- -

(3,3

46)

Gra

nt re

ceive

d on

em

issio

n al

lowa

nces

-

- 1,

733

- -

1,73

3 Am

ortis

atio

n ch

arge

(1

,673

) (2

,544

) (1

) (5

3)

- (4

,271

) N

et

bo

ok a

mo

un

t at

31 D

ecem

ber

2016

15,1

54

2,8

56

11,8

34

956

1,4

61

32,2

61

At

31 D

ecem

ber

2016

Acqu

isitio

n co

st

17,9

57

13,5

72

11,8

38

1,43

5 1,

461

46,2

63

Accu

mul

ated

am

ortis

atio

n (2

,803

) (1

0,71

6)

(4)

(479

) -

(14,

002)

N

et

bo

ok a

mo

un

t 15,1

54

2,8

56

11,8

34

956

1,4

61

32,2

61

The

fair

valu

e of

em

issio

n al

lowa

nces

is d

eter

min

ed w

ith re

fere

nce

to th

e pr

ices

ava

ilabl

e on

the

activ

e m

arke

t, an

d ac

cord

ingl

y, it

is w

ithin

Lev

el 1

of t

he fa

ir va

lue

hier

arch

y. A

t the

end

of e

ach

repo

rting

pe

riod,

em

issio

n al

lowa

nces

are

mea

sure

d wi

th re

fere

nce

to y

ear-e

nd m

arke

t pric

es.

In 2

016

the

Gro

up a

ccou

nted

for P

aten

ts a

nd li

cens

es id

entif

ied

in b

usin

ess

com

bina

tion

that

com

prise

Lice

nse

to p

rodu

ce e

lect

ricity

with

ince

ntive

rate

. Fai

r val

ue o

f the

Lic

ense

, at t

he m

omen

t of b

usin

ess

acqu

isitio

n, w

as d

eter

min

ed to

be

EUR

14,

900

thou

sand

, am

ortis

atio

n pe

riod

of th

e Li

cens

e ar

e se

t to

11 y

ears

. Car

ryin

g va

lue

of th

e Li

cens

e at

31

Dec

embe

r 201

6 is

13,7

62 th

ousa

nd E

UR

.

F-50

245496 Olive pp138-imp 27/06/2017 09:22 Page 50

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

143

AN

NU

AL R

EPO

RT 2

016

|

6 Pr

oper

ty, p

lant

and

equ

ipm

ent

The

Gro

up re

late

d di

sclo

sure

s on

Pro

perty

, pla

nt a

nd e

quip

men

t

(con

t’d)

Gro

up

L

an

d

Bu

ild

ing

s

Str

uctu

res

an

d

mach

inery

Gas d

istr

ibu

tio

n

pip

elin

es, G

as

tech

no

log

ical

eq

uip

men

t an

d

insta

llati

on

s

Str

uctu

res a

nd

m

ach

inery

of H

yd

ro

Po

wer

Pla

nt,

Pu

mp

ed

Sto

rag

e

Po

wer

Pla

nt

Win

d

po

wer

pla

nts

Str

uctu

res a

nd

m

ach

inery

of

Th

erm

al P

ow

er

Pla

nt

Mo

tor

veh

icle

s

IT a

nd

te

lecom

mu

nic

atio

n

eq

uip

men

t O

ther

PP

&E

Co

nstr

ucti

on

in

pro

gre

ss

To

tal

A

t 31 D

ecem

ber

2014

Cost

or r

eval

ued

amou

nt

2,01

1 6

8,19

0 6

58,8

02

111,

201

204

,418

-

921

,772

1

9,33

0 2

4,28

3 1

3,38

2 4

4,42

4 2,

067,

813

Accu

mul

ated

dep

recia

tion

-

(1,2

42)

(4,8

91)

(1,7

79)

(71,

405)

-

(341

,814

) (1

,542

) (1

0,87

0)

(1,4

97)

- (4

35,0

40)

Accu

mul

ated

impa

irmen

t -

- -

- -

- (1

1,46

1)

- -

- (2

23)

(11,

684)

N

et

bo

ok a

mo

un

t 2,0

11

66,9

48

653,9

11

109,4

22

133,0

13

- 5

68,4

97

17,7

88

13,4

13

11,8

85

44,2

01

1,6

21,0

89

N

et

bo

ok a

mo

un

t at

31

Decem

ber

2014

2,0

11

66,9

48

653,9

11

109,4

22

133,0

13

- 5

68,4

97

17,7

88

13,4

13

11,8

85

44,2

01

1,6

21,0

89

Addi

tions

-

44

1,13

3 15

18

-

1,04

5 7,

325

1,27

4 37

7 13

6,50

8 14

7,73

9 Re

valu

atio

n

- 1,

308

125

- -

- -

(29)

-

- -

1,40

4 Di

spos

als

- (6

12)

(56)

-

- -

- (3

30)

(93)

(4

24)

(21)

(1

,536

) W

rite-

offs

-

(14)

(2

,605

) (4

) -

- -

(1)

(15)

(1

7)

(43)

(2

,699

) Re

clas

sific

atio

ns b

etwe

en g

roup

s -

3,65

8 10

9,71

5 9,

533

722

- 34

,572

10

8,

036

(3,8

63)

(162

,383

) -

Recl

assi

fied

to a

sset

s, in

tang

ible

ass

ets

- -

- -

- -

- -

(15)

-

(64)

(7

9)

Recl

assi

fied

to a

sset

s he

ld fo

r sal

e -

- -

- -

- -

(46)

-

- -

(46)

Re

clas

sifie

d to

inve

stm

ent p

rope

rty

- (1

1,97

3)

(559

) -

- -

- -

- -

- (1

2,53

2)

Recl

assi

fied

to fi

nanc

e le

ase

(Not

e 14

) -

- -

- -

- -

(1,9

57)

- -

- (1

,957

) Re

clas

sifie

d fro

m (t

o) in

vent

orie

s -

- -

- 28

-

175

48

(3)

- 14

6 39

4 Im

pairm

ent

- -

- -

- -

(36,

734)

(6

) -

- -

(36,

740)

Re

vers

al o

f im

pairm

ent

- -

- -

- -

148

- -

- -

148

Depr

ecia

tion

char

ge

- (3

,380

) (3

2,09

3)

(3,6

86)

(7,9

54)

- (2

5,42

6)

(4,9

23)

(4,7

04)

(1,9

02)

- (8

4,06

8)

Net

bo

ok a

mo

un

t at

31

Decem

ber

2015

2,0

11

55,9

79

729,5

71

115,2

80

125,8

27

- 542,2

77

17,8

79

17,8

93

6,0

56

18,3

44

1,6

31,1

17

A

t 31 D

ecem

ber

2015

Cost

or r

eval

ued

amou

nt

2,0

11

60,

698

766

,198

12

0,74

2 2

05,1

22

- 88

7,17

4 2

3,80

1 3

4,60

4 8

,145

1

8,56

7 2,

127,

062

Accu

mul

ated

dep

recia

tion

-

(4,7

19)

(36,

627)

(5

,462

) (7

9,29

5)

- (3

07,3

30)

(5,9

22)

(16,

711)

(2

,089

) -

(458

,155

) Ac

cum

ulat

ed im

pairm

ent

- -

- -

- -

(37,

567)

-

- -

( 223

) (3

7,79

0)

Net

bo

ok a

mo

un

t 2,0

11

55,9

79

729,5

71

115,2

80

125,8

27

- 542,2

77

17,8

79

17,8

93

6,0

56

18,3

44

1,6

31,1

17

(Con

t‘d o

n ne

xt p

age)

F-51

245496 Olive pp138-imp 27/06/2017 09:22 Page 51

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

144

AN

NU

AL R

EPO

RT 2

016

|

(c

ont’d

)

Gro

up

L

an

d

Bu

ild

ing

s

Str

uctu

res

an

d

mach

inery

Gas d

istr

ibu

tio

n

pip

elin

es, G

as

tech

no

log

ical

eq

uip

men

t an

d

insta

llati

on

s

Str

uctu

res a

nd

m

ach

inery

of H

yd

ro

Po

wer

Pla

nt,

Pu

mp

ed

Sto

rag

e

Po

wer

Pla

nt

Win

d

po

wer

pla

nts

Str

uctu

res a

nd

m

ach

inery

of

Th

erm

al P

ow

er

Pla

nt

Mo

tor

veh

icle

s

IT a

nd

te

lecom

mu

nic

atio

n

eq

uip

men

t O

ther

PP

&E

Co

nstr

ucti

on

in

pro

gre

ss

To

tal

N

et

bo

ok a

mo

un

t at

31 D

ecem

ber

2015

2,01

1 5

5,97

9 7

29,5

71

115,2

80

125

,827

-

542,

277

17,

879

17,

893

6,0

56

18,

344

1,63

1,11

7 Ad

ditio

ns

- 12

9 86

2 7

8 -

89

13,2

82

4,56

4 70

8 15

2,31

1 17

1,96

0 In

-kin

d co

ntrib

utio

ns re

ceive

d -

- -

- -

- -

- -

- 3,

954

3,95

4 Re

valu

atio

n

- 67

4 (9

9)

- -

- -

- -

- -

575

Disp

osal

s -

(621

) (2

47)

- -

- (2

) (2

06)

(30)

(4

) (1

0)

(1,1

20)

Writ

e-of

fs

- (8

) (3

,337

) (1

2)

- -

(2)

(9)

(22)

(3

) -

(3,3

93)

Recl

assi

ficat

ions

bet

ween

gro

ups

- 68

7 11

4,97

0 14

,112

1,

338

- 1,

834

- 1,

021

1,99

6 (1

35,9

58)

0 Re

clas

sifie

d to

ass

ets,

inta

ngib

le a

sset

s -

- -

- -

- -

- (8

) -

(125

) (1

33)

Recl

assi

fied

to a

sset

s he

ld fo

r sal

e -

(226

) (3

) -

- -

- (1

,351

) -

- -

(1,5

80)

Recl

assi

fied

to in

vest

men

t pro

perty

-

3,43

0 (1

91)

- -

- -

- -

- (2

,812

) 42

7 Re

clas

sifie

d to

fina

nce

leas

e (N

ote

14)

- -

- -

- -

- (7

,617

) -

- -

(7,6

17)

Recl

assi

fied

from

(to)

inve

ntor

ies

- -

- -

51

- (3

6)

- (1

1)

- 84

0 84

4 Im

pairm

ent

- -

- -

- -

(613

) -

- -

- (6

13)

Reve

rsal

of i

mpa

irmen

t -

- 2

- -

- 45

-

- -

- 47

De

prec

iatio

n ch

arge

-

(2,3

64)

(35,

926)

(4

,461

) (7

,975

) (1

,684

) (2

3,36

1)

(4,7

36)

(4,4

33)

(1,7

14)

- (8

6,65

4)

Incr

ease

on

acqu

isitio

n of

sub

sidi

ary

(Not

e 33

) 36

5 60

2 -

- -

62,0

29

- -

1 3

- 63

,000

N

et

bo

ok a

mo

un

t at

31

Decem

ber

2016

2,3

76

58,2

82

805,6

02

124,9

26

119,2

49

60,3

45

520,2

31

17,2

42

18,9

75

7,0

42

36,5

44

1,7

70,8

14

A

t 31 D

ecem

ber

2016

Cost

or r

eval

ued

amou

nt

2,37

6 65

,579

87

6,99

2 13

4,04

6 20

6,49

2 62

,029

88

8,63

3 27

,725

39

,315

10

,904

36

,767

2,

350,

858

Accu

mul

ated

dep

recia

tion

-

(7,2

97)

(71,

390)

(9

,120

) (8

7,24

3)

(1,6

84)

(330

,267

) (1

0,48

3)

(20,

340)

(3

,862

) -

(541

,686

) Ac

cum

ulat

ed im

pairm

ent

- -

- -

- -

(38,

135)

-

- -

(223

) (3

8,35

8)

Net

bo

ok a

mo

un

t 2,3

76

58,2

82

805,6

02

124,9

26

119,2

49

60,3

45

520,2

31

17,2

42

18,9

75

7,0

42

36,5

44

1,7

70,8

14

In 2

016

and

2015

, the

Gro

up's

prop

erty

, pla

nt a

nd e

quip

men

t (ex

cludi

ng s

truct

ures

and

mac

hine

ry o

f Hyd

ro P

ower

Pla

nt, P

umpe

d St

orag

e Po

wer P

lant

and

The

rmal

Pow

er P

lant

(Com

bine

d C

ycle

Uni

t, R

eser

ve P

ower

Pla

nt),

gas

dist

ribut

ion

pipe

lines

, gas

tech

nolo

gica

l equ

ipm

ent,

wind

pow

er p

lans

, and

IT a

nd te

leco

mm

unica

tion

equi

pmen

t) wa

s ac

coun

ted

for a

t rev

alue

d am

ount

.

F-52

245496 Olive pp138-imp 27/06/2017 09:22 Page 52

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

145

AN

NU

AL R

EPO

RT 2

016

|

In 2

016,

the

Gro

up p

erfo

rmed

reva

luat

ion

of b

uild

ings

with

car

ryin

g am

ount

of E

UR 3

4,20

0 th

ousa

nd

and

stru

ctur

es a

nd m

achi

nery

with

carry

ing

amou

nt o

f EUR

800

thou

sand

with

refe

renc

e to

the

Rep

orts

on

Ass

essm

ent o

f Mar

ket V

alue

of I

mm

ovab

le P

rope

rty p

repa

red

by in

depe

nden

t pro

perty

val

uer

InR

eal U

AB; t

he a

sset

s we

re v

alue

d us

ing

the

sale

s co

mpa

rison

app

roac

h (a

nalo

gous

sal

es

pric

e) a

nd th

e in

com

e ap

proa

ch.

The

tabl

e be

low

cont

ains

info

rmat

ion

on th

e re

sults

of r

eval

uatio

n pe

rform

ed in

201

6:

Gro

up

Decre

ase i

n o

ther

co

mp

reh

en

siv

e

inc

om

e a

nd

re

valu

ati

on

reserv

e in

eq

uit

y

Rec

og

nis

ed

in

p

rofi

t o

r lo

ss

To

tal

revalu

ati

on

eff

ect

Incr

ease

(dec

reas

e) in

car

ryin

g am

ount

4

53

122

5

75

453

122

575

The

tabl

e be

low

cont

ains

info

rmat

ion

on th

e re

sults

of r

eval

uatio

n pe

rform

ed in

201

5:

Gro

up

Decre

ase i

n o

ther

co

mp

reh

en

siv

e

inc

om

e a

nd

re

valu

ati

on

reserv

e in

eq

uit

y

Reco

gn

ised

in

p

rofi

t o

r lo

ss

To

tal

revalu

ati

on

eff

ect

Incr

ease

(dec

reas

e) in

car

ryin

g am

ount

1,

274

130

1,40

4

1,2

74

130

1,4

04

In th

e op

inio

n of

the

Gro

up’s

man

agem

ent,

the

carry

ing

amou

nt o

f ass

ets

stat

ed a

t rev

alue

d am

ount

as

at 3

1 D

ecem

ber 2

016

did

not d

iffer

sig

nific

antly

from

thei

r fai

r val

ue. T

he ta

ble

belo

w pr

esen

ts th

e di

strib

utio

n of

the

Gro

up’s

pro

perty

, pla

nt a

nd e

quip

men

t bas

ed o

n th

e fa

ir va

lue

hier

arch

y le

vels

as

at 3

1 D

ecem

ber 2

016

(see

Not

e 2.

30 fo

r the

des

crip

tion

of fa

ir va

lue

hier

arch

y le

vels

).

Gro

up

Le

ve

l 1

Le

ve

l 2

Le

ve

l 3

To

tal

Qu

ote

d p

rices

in a

cti

ve

mark

ets

Oth

er

dir

ectl

y o

r in

dir

ectl

y

ob

serv

ab

le in

pu

ts

Un

ob

serv

ab

le

inp

uts

Land

-

2,03

2 34

4 2,

376

Build

ings

-

6,23

7 52

,045

58

,282

St

ruct

ures

and

mac

hine

ry

- 3,

174

802,

428

805,

602

Mot

or v

ehic

les

- 14

,708

2,

534

17,2

42

Oth

er p

rope

rty, p

lant

and

eq

uipm

ent

- 95

6,

947

7,04

2

Con

stru

ctio

n in

pro

gres

s -

- 36

,544

36

,544

T

ota

l -

36,1

12

890,9

76

927,0

88

The

tabl

e be

low

pres

ents

dis

tribu

tion

of th

e G

roup

’s p

rope

rty, p

lant

and

equ

ipm

ent b

ased

on

fair

valu

e hi

erar

chy

leve

ls a

s at

31

Dec

embe

r 201

5 (s

ee N

ote

2.30

for t

he d

escr

iptio

n of

fair

valu

e hi

erar

chy

leve

ls).

Gro

up

Le

ve

l 1

Le

ve

l 2

Le

ve

l 3

To

tal

Qu

ote

d p

rices

in a

cti

ve

mark

ets

Oth

er

dir

ectl

y o

r in

dir

ectl

y

ob

serv

ab

le in

pu

ts

Un

ob

serv

ab

le

inp

uts

Land

-

1,88

0 79

1,

959

Build

ings

-

6,89

1 49

,088

55

,979

Stru

ctur

es a

nd m

achi

nery

-

3,07

8 72

5,51

9 72

8,59

7M

otor

veh

icle

s -

16,8

81

971

17,8

52O

ther

pro

perty

, pla

nt a

nd

equi

pmen

t -

118

5,47

5 5,

593

Con

stru

ctio

n in

pro

gres

s -

- 12

,297

12

,297

To

tal

- 28,8

48

793,4

29

822,2

77

Land

was

mos

tly a

ttrib

uted

to L

evel

2 o

f the

fair

valu

e hi

erar

chy.

The

val

uatio

n wa

s ba

sed

on th

e m

arke

t app

roac

h.

Bu

ildin

gs w

ere

attri

bute

d to

Lev

els

2 an

d 3

of fa

ir va

lue

hier

arch

y. T

he v

alua

tion

of b

uild

ings

attr

ibut

ed

to L

evel

2 w

as b

ased

on

the

com

para

tive

valu

e m

etho

d ap

proa

ch. T

he v

alua

tion

of a

sset

s at

tribu

ted

to L

evel

3 w

as b

ased

on

the

inco

me

appr

oach

, com

para

tive

valu

e m

etho

d ap

proa

ch, t

he co

st a

ppro

ach

or m

ix of

thes

e ap

proa

ches

. St

ruct

ures

and

mac

hine

ry w

ere

attri

bute

d to

Lev

els

2 an

d 3

of fa

ir va

lue

hier

arch

y. T

he v

alua

tion

of

asse

ts w

ithin

Lev

el 2

was

bas

ed o

n th

e m

arke

t app

roac

h. T

he v

alua

tion

of a

sset

s wi

thin

Lev

el 3

was

ba

sed

on th

e in

com

e ap

proa

ch, c

ompa

rativ

e va

lue

met

hod

appr

oach

, the

cos

t app

roac

h or

mix

of

thes

e ap

proa

ches

.. Th

e va

luat

ion

was

base

d on

dat

a an

d in

form

atio

n av

aila

ble

to th

e va

luer

to m

ake

accu

rate

fore

cast

s of

futu

re c

ash

flows

. M

otor

veh

icle

s we

re a

ttrib

uted

to L

evel

s 2

and

3 of

fair

valu

e hi

erar

chy.

The

val

uatio

n wa

s ba

sed

on

the

mar

ket a

ppro

ach

and

cost

app

roac

h.

Con

stru

ctio

n in

pro

gres

s an

d ot

her P

P&E

were

mos

tly a

ttrib

uted

to L

evel

3 o

f fai

r val

ue h

iera

rchy

, va

luat

ion

was

base

d on

inco

me

met

hod

or d

epre

ciate

d re

plac

emen

t cos

t met

hod.

The

man

agem

ent

cons

ider

s, th

at c

ost o

f the

se a

sset

s ap

prox

imat

e its

fair

valu

e.

Dur

ing

2016

, the

Gro

up c

ompa

nies

did

not

cap

italiz

e an

y in

tere

st e

xpen

ses

on b

orro

wing

s in

tend

ed

to fi

nanc

e de

velo

pmen

t of n

on-c

urre

nt a

sset

s (2

015:

EU

R 1

11 th

ousa

nd).

The

aver

age

capi

talis

ed

inte

rest

rate

was

0.2

9% in

201

5.

The

Gro

up h

as s

igni

fican

t com

mitm

ents

to p

urch

ase

prop

erty

, pla

nt a

nd e

quip

men

t to

be fu

lfille

d in

la

ter p

erio

ds. A

s at

31

Dec

embe

r 201

6, th

e G

roup

’s c

omm

itmen

ts to

pur

chas

e or

con

stru

ct p

rope

rty,

plan

t and

equ

ipm

ent a

mou

nted

to E

UR

362

milli

on (3

1 D

ecem

ber 2

015:

EUR

20.

1 m

illion

). As

at 3

1 D

ecem

ber 2

016,

the

Gro

up h

ad p

ledg

ed to

the

bank

s its

pro

perty

, pla

nt a

nd e

quip

men

t in

amou

nt o

f EUR

353

,686

thou

sand

(31

Dec

embe

r 201

5: E

UR

345

,297

thou

sand

) (N

ote

19).

F-53

245496 Olive pp138-imp 27/06/2017 09:22 Page 53

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

146

AN

NU

AL R

EPO

RT 2

016

|

The

Com

pany

rela

ted

disc

losu

res

on P

rope

rty, p

lant

and

equ

ipm

ent

Co

mp

an

y

Oth

er

PP

&E

C

on

str

ucti

on

in

pro

gre

ss

To

tal

At

31 D

ecem

ber

2014

Cos

t or r

eval

ued

amou

nt

28

- 28

Ac

cum

ulat

ed d

epre

ciat

ion

(1

9)

- (1

9)

Net

bo

ok a

mo

un

t 9

- 9

Net

bo

ok a

mo

un

t at

31 D

ecem

ber

2014

9

- 9

Addi

tions

-

280

280

Dep

reci

atio

n ch

arge

(3

) -

(3)

Net

bo

ok a

mo

un

t at

31 D

ecem

ber

2015

6

280

286

At

31 D

ecem

ber

2015

Cos

t or r

eval

ued

amou

nt

28

280

308

Accu

mul

ated

dep

reci

atio

n

(22)

-

(22)

N

et

bo

ok a

mo

un

t 6

280

286

Net

bo

ok a

mo

un

t at

31 D

ecem

ber

2015

6

280

286

Addi

tions

-

65

65

Dep

reci

atio

n ch

arge

(3

) -

(3)

Net

bo

ok a

mo

un

t at

31 D

ecem

ber

2016

3

345

348

At

31 D

ecem

ber

2016

Cos

t or r

eval

ued

amou

nt

28

345

373

Accu

mul

ated

dep

reci

atio

n

(25)

-

(25)

N

et

bo

ok a

mo

un

t 3

345

348

7 In

vest

men

t pro

perty

G

rou

p

Investm

en

t p

rop

ert

y

Carr

yin

g a

mo

un

t at

31 D

ecem

ber

2014

37,3

94

Rec

lass

ificat

ion

from

pro

perty

, pla

nt a

nd e

quip

men

t 12

,532

In

crea

se in

val

ue

515

Dec

reas

e in

val

ue

(1,9

22)

Carr

yin

g a

mo

un

t at

31 D

ecem

ber

2015

48,5

19

Carr

yin

g a

mo

un

t at

31 D

ecem

ber

2015

48,5

19

Rec

lass

ificat

ion

from

pro

perty

, pla

nt a

nd e

quip

men

t (4

27)

Incr

ease

in v

alue

4,

323

Dec

reas

e in

val

ue

(4,1

09)

Dis

posa

l (2

,099

) C

arr

yin

g a

mo

un

t at

31 D

ecem

ber

2016

46,2

07

In 2

016,

the

Gro

up's

inco

me

from

leas

e of

inve

stm

ent p

rope

rty a

mou

nted

to E

UR 2

,707

thou

sand

(2

015:

EU

R 2

,652

thou

sand

). In

201

6 an

d 20

15 th

e C

ompa

ny h

ad n

o in

vest

men

t pro

perty

. Th

e ta

ble

belo

w p

rese

nts

dist

ribut

ion

of th

e G

roup

’s in

vest

men

t pro

perty

bas

ed o

n fa

ir va

lue

hier

arch

y

leve

ls a

s at

31

Dec

embe

r 201

6 (s

ee N

ote

2.30

for t

he d

escr

iptio

n of

fair

valu

e hi

erar

chy

leve

ls).

Gro

up

Le

ve

l 1

Le

ve

l 2

Le

ve

l 3

To

tal

Qu

ote

d p

rices

in a

cti

ve

mark

ets

Oth

er

dir

ectl

y

or

ind

irectl

y

ob

serv

ab

le

inp

uts

Un

ob

serv

ab

le

inp

uts

Bu

ildin

gs

- -

44,7

56

44,7

56

Stru

ctur

es

- -

1,45

1 1,

451

To

tal

- -

46,2

07

46,2

07

The

tabl

e be

low

pre

sent

s di

strib

utio

n of

the

Gro

up’s

inve

stm

ent p

rope

rty b

ased

on

fair

valu

e hi

erar

chy

leve

ls a

s at

31

Dec

embe

r 201

5 (s

ee N

ote

2.30

for t

he d

escr

iptio

n of

fair

valu

e hi

erar

chy

leve

ls).

Gro

up

Le

ve

l 1

Le

ve

l 2

Le

ve

l 3

To

tal

Qu

ote

d p

rices in

acti

ve m

ark

ets

Oth

er

dir

ectl

y o

r in

dir

ectl

y

ob

serv

ab

le in

pu

ts

Un

ob

serv

ab

le

inp

uts

Build

ings

-

- 47

,148

47

,148

St

ruct

ures

-

- 1,

371

1,37

1 T

ota

l -

- 48,5

19

48,5

19

The

fair

valu

e of

inve

stm

ent p

rope

rty a

s at

31

Dec

embe

r 201

6 an

d 20

15 w

as d

eter

min

ed in

Nov

embe

r 20

16 a

nd D

ecem

ber 2

015,

resp

ectiv

ely.

Val

uatio

ns w

ere

carri

ed o

ut b

y in

depe

nden

t pro

perty

val

uers

us

ing

the

mar

ket a

ppro

ach

and

inco

me

appr

oach

. Inv

estm

ent p

rope

rty is

attr

ibut

ed to

Lev

el 3

of f

air

valu

e hi

erar

chy.

The

val

uatio

n wa

s ba

sed

on d

ata

and

info

rmat

ion

avai

labl

e to

the

valu

er fo

r mak

ing

accu

rate

for

ecas

ts o

f fu

ture

cas

h flo

ws.

Futu

re c

ash

inflo

ws w

ere

estim

ated

with

ref

eren

ce t

o co

mpa

rabl

e ob

ject

rent

al p

rices

, adj

uste

d fo

r loc

atio

n, c

ondi

tion

and

othe

r fac

tors

affe

ctin

g th

e va

lue,

an

d wi

th re

fere

nce

to th

e ac

tual

rent

al p

rices

of t

he s

ubje

ct o

bjec

t, ad

just

ed fo

r the

occ

upan

cy ra

te.

In

the

opin

ion

of th

e G

roup

's m

anag

emen

t, th

e va

lue

of in

vest

men

t pro

perty

det

erm

ined

usi

ng th

e ab

ove-

men

tione

d ap

proa

ch re

pres

ente

d its

fair

valu

e as

at 3

1 D

ecem

ber 2

016

and

2015

. 8

Inve

stm

ents

in s

ubsi

diar

ies

and

asso

ciate

s R

eorg

anis

atio

n of

sub

sidi

arie

s O

n 1

Janu

ary

2016

, LE

STO

AB

and

Liet

uvos

Duj

os A

B we

re re

orga

nise

d by

way

of m

erge

r und

er A

rt.

2.97

(4) o

f the

Lith

uani

an C

ivil C

ode,

as

a re

sult

of w

hich

a n

ew e

ntity

Ene

rgijo

s Sk

irsty

mo

Ope

rato

rius

AB (E

SO) w

as fo

unde

d. A

s fro

m 1

1 Ja

nuar

y 20

16, t

he s

hare

s of

ESO

hav

e be

en q

uote

d on

the

Mai

n Li

st o

f NA

SDAQ

OM

X Vi

lniu

s st

ock

exch

ange

. Fol

lowi

ng t

he r

eorg

anis

atio

n, E

SO t

ook

over

fro

m

LEST

O A

B an

d Li

etuv

os D

ujos

AB

all t

heir

non-

curre

nt a

nd c

urre

nt a

sset

s, n

on-c

urre

nt a

nd c

urre

nt

finan

cial

and

oth

er li

abilit

ies,

am

ount

s re

ceiva

ble

and

paya

ble

unde

r the

agr

eem

ents

sig

ned

betw

een

LEST

O A

B an

d Li

etuv

os D

ujos

AB,

incl

udin

g an

y ot

her o

ther

wise

aris

ing

oblig

atio

ns.

Follo

wing

the

mer

ger o

f LES

TO A

B an

d Li

etuv

os D

ujos

AB

, the

Gro

up’s

effe

ctiv

e ow

ners

hip

inte

rest

in

Ene

rgijo

s Sk

irsty

mo

Ope

rato

rius

AB is

94.

98%

.

On

1 Ja

nuar

y 20

16, E

LEKT

RO

S TI

NKL

O P

ASLA

UG

OS

UAB

and

Kau

no E

nerg

etik

os R

emon

tas

UAB

we

re re

orga

nise

d by

way

of m

erge

r, as

a re

sult

of w

hich

ELE

KTR

OS

TIN

KLO

PAS

LAUG

OS

UAB

and

F-54

245496 Olive pp138-imp 27/06/2017 09:22 Page 54

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

147

AN

NU

AL R

EPO

RT 2

016

|

Kaun

o En

erge

tikos

Rem

onta

s UA

B ce

ased

to e

xist a

s le

gal e

ntitie

s an

d a

new

entit

y wa

s fo

unde

d un

der t

he n

ame

of E

nerg

etik

os P

asla

ugų

ir R

ango

s O

rgan

izac

ija U

AB.

Foun

datio

n of

sub

sidi

arie

s O

n 9

Febr

uary

201

6, th

e C

ompa

ny fo

unde

d a

new

ent

ity E

nerg

ijos

Spr

endi

mų

Cen

tras

UAB

with

the

auth

oris

ed s

hare

cap

ital o

f EU

R 1

0 th

ousa

nd, w

hich

is d

ivid

ed in

to 1

0,00

0 or

dina

ry re

gist

ered

sha

res

with

the

nom

inal

val

ue o

f EU

R 1

eac

h. T

he to

tal is

sue

price

of s

hare

s wa

s eq

ual t

o EU

R 15

0 th

ousa

nd.

Ene

rgijo

s S

pren

dim

ų C

entra

s U

AB p

rovi

des

ener

gy s

avin

g (e

ffici

ency

) se

rvic

es a

nd is

eng

aged

in

deve

lopm

ent

of r

enew

able

ene

rgy

sour

ces.

The

Arti

cles

of

Asso

ciat

ion

of E

nerg

ijos

Spr

endi

mų

Cen

tras

UAB

wer

e re

gist

ered

with

the

Reg

ister

of L

egal

Ent

ities

on 1

7 Fe

brua

ry 2

016.

In

crea

se a

nd d

ecre

ase

in s

hare

cap

ital,

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isiti

ons

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iarie

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urin

g 20

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ease

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tals

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diar

ies

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red

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re a

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llows

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bsid

iary

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su

e d

ate

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mo

un

t o

f sh

are

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al

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ce

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min

al

va

lue o

f is

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ed

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ber

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ny

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ing

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ease

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ecre

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re a

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llows

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ate

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ou

nt

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sh

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an

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al

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ce

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min

al

va

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ng

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pa

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r 2015

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en

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men

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ko

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ly 20

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nt o

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res

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e C

ompa

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Dur

ing

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Com

pany

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uire

d sh

ares

of

indi

rect

ly, t

hrou

gh o

ther

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sidia

ries,

con

trolle

d co

mpa

nies

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ate

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ou

nt

of

sh

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acq

uir

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, p

cs

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pu

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ase

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ntin

gen

t co

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uit

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, p

erc

en

t

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m

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F-55

245496 Olive pp138-imp 27/06/2017 09:22 Page 55

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

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ea

r e

nd

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cem

be

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01

6

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mou

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NU

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|

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ium

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n av

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rate

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vest

men

t am

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ny a

cqui

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ver t

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s of

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in o

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n 15

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ch 2

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uno

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ė Jė

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ė U

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ach.

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l iss

ue p

rice

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w sh

ares

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ount

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ld b

y FO

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h su

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perty

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ote

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ank

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tal E

UR

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n am

ount

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ted

in t

he G

roup

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tate

men

t of

cha

nges

in e

quity

line

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se in

sha

re c

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o K

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se o

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tere

st o

f EU

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ay a

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nder

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ion

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ided

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es 4

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l EU

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Com

pany

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ned

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are

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ster

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as U

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its s

hare

cap

ital.

The

cost

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cqui

sitio

n of

sha

res

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nted

to E

UR 3

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hare

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as U

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Bu

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ure

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plia

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rulin

g of

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Supr

eme

Cou

rt of

Lith

uani

a

Und

er t

he F

inan

ce M

inis

ter’s

Ord

er o

f 12

Jan

uary

201

6, t

he C

ompa

ny is

obl

iged

to im

plem

ent t

he

Lith

uani

an G

over

nmen

t Res

olut

ion

No

1126

of 2

6 O

ctob

er 2

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ut o

f sha

res

(the

Reso

lutio

n),

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to b

uy o

ut (o

btai

n ow

ners

hip

title

to) t

he s

hare

s of

the

Liet

uvos

Ene

rgijo

s G

amyb

a AB

(for

mer

AB

LIE

TUV

OS

ELE

KTR

INĖ

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m m

inor

ity s

hare

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ers

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wing

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reor

gani

satio

n of

AB

LIET

UVO

S E

NE

RG

IJA

and

AB

LIE

TUVO

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e no

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pose

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ties.

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n 9

Febr

uary

201

6, th

e da

te fo

r ini

tiatio

n of

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out o

f sha

res

was

publ

ishe

d. T

he p

rice

of o

ne o

rdin

ary

regi

ster

ed s

hare

of L

ietu

vos

Ener

gijo

s G

amyb

a AB

to b

e bo

ught

out

was

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al to

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R 1

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9.

On

31 D

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ber 2

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Com

pany

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aine

d ow

ners

hip

title

to a

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onal

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40 s

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r EUR

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103

thou

sand

of L

ietu

vos

Ener

gijo

s G

amyb

a AB

, as

a re

sult

of w

hich

the

Com

pany

‘s o

wne

rshi

p in

tere

st in

Lie

tuvo

s En

ergi

jos

Gam

yba

AB in

crea

sed

up to

96.

75%

as

at 3

1 D

ecem

ber

2016

. The

co

mpa

ny h

as n

o fu

rther

com

mitm

ents

for a

cqui

sitio

n of

Lie

tuvo

s En

ergi

jos

Gam

yba

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hare

s.

Dec

isio

n on

dis

posa

l of D

uom

enų

Logi

stik

os C

entra

s U

AB

In N

ovem

ber

2016

, th

e C

ompa

ny’s

sha

reho

lder

mad

e a

deci

sion

to

initi

ate

disp

osal

of

Duo

men

ų Lo

gist

ikos

Cen

tras

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ereb

y co

ntrib

utin

g to

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ther

atte

mpt

s of

iden

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ng c

lear

ly t

he G

roup

’s

activ

ities

and

focu

sing

on

the

mai

n on

es. T

he d

ispos

al is

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ecte

d to

be

final

ized

by

the

mid

dle

of

2017

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at 3

1 D

ecem

ber 2

016,

the

Com

pany

incl

uded

the

carry

ing

amou

nt o

f inv

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ent i

n D

uom

enų

Logi

stiko

s C

entra

s UA

B wi

thin

non

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rent

ass

ets

held

for s

ale

in th

e st

atem

ent o

f fin

anci

al p

ositio

n.

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subs

idia

ry is

con

solid

ated

is th

e G

roup

finan

cial

sta

tem

ents

. As a

t 31

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r 201

6, th

e ca

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g

amou

nt o

f inv

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ent w

as E

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nd. I

n th

e op

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Com

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anag

emen

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rryin

g am

ount

of i

nves

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pote

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n co

sts.

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irmen

t of

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est o

f inv

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ents

, per

form

ed in

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llowi

ng im

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ent l

osse

s (re

vers

al o

f im

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ent l

osse

s) w

ere

reco

gnize

d in

yea

r 201

6:

Su

bsid

iary

C

arr

yin

g v

alu

e

31 D

ecem

ber

2016

Carr

yin

g v

alu

e

31 D

ecem

ber

2015

Imp

air

me

nt

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ss)

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al

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CI

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vere

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losses

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05

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vers

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f im

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gnize

d in

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r 201

5:

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bsid

iary

C

arr

yin

g v

alu

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31 D

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ber

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g v

alu

e

31 D

ecem

ber

2014

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air

me

nt

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CI

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vere

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- 725

F-56

245496 Olive pp138-imp 27/06/2017 09:22 Page 56

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

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cem

be

r 2

01

6

All a

mou

nts

in E

UR

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sand

s un

less

oth

erw

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stat

ed

149

AN

NU

AL R

EPO

RT 2

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|

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at 3

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ecem

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an

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en

tag

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g

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llin

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l to

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file

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uvos

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thua

nia

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nt c

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ing

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gijo

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mo

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pply

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agem

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bsid

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ectri

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ratio

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RAKR

AS U

AB

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uani

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bsid

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.00

25.0

0 De

velo

pmen

t of w

ind

powe

r pla

nts.

Li

etuv

os D

ujų

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imas

UA

B Li

thua

nia

Subs

idia

ry

100.

00

- G

as s

uppl

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NT V

aldo

s UA

B Li

thua

nia

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idia

ry

100.

00

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pera

tion

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al e

stat

e, o

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ted

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ities

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prov

ision

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ices.

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chno

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jų ir

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acijų

Cen

tras

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uani

a Su

bsid

iary

97

.80

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Pr

ovis

ion

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ecom

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icatio

n an

d ot

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rget

ikos

Pas

laug

ų ir

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gos

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aniz

acija

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B

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uani

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Tu

ulee

nerg

ia O

U Es

toni

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Deve

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s, a

nd e

lect

ricity

ge

nera

tion.

En

ergi

jos

tiekim

as U

AB

Lith

uani

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bsid

iary

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0.00

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Supp

ly of

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ctric

ity a

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al g

as.

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AS U

AB

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uani

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bsid

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0.00

-

Supp

ly of

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d na

tura

l gas

via

the

term

inal

and

trad

e in

nat

ural

gas

. E

nerg

etik

ų M

okym

o C

entra

s Vš

Į Li

thua

nia

Subs

idia

ry

100.

00

- Pr

ofes

sion

al d

evel

opm

ent a

nd c

ontin

uing

trai

ning

of e

nerg

y sp

ecia

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. E

lekt

roni

nių

Mok

ėjim

ų A

gent

ūra

UAB

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mer

G

otlita

s UA

B)

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uani

a Su

bsid

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0.00

-

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isio

n of

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men

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lect

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rslo

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arna

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VAE

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UAB

Li

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100.

00

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r man

agem

ent a

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ties.

V

ilnia

us K

ogen

erac

inė

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inė

UAB

Li

thua

nia

Subs

idia

ry

100.

00

- M

oder

nisa

tion

of d

istric

t hea

ting

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ly in

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ius

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D

uom

enų

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stik

os C

entra

s U

AB

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uani

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bsid

iary

79

.60

20.4

0 Pr

ovis

ion

of IT

and

tele

com

mun

icatio

n su

ppor

t ser

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nerg

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Spre

ndim

ų C

entra

s U

AB

Lith

uani

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0.00

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impl

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eton

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00

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ly.

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uvos

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port

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thua

nia

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idia

ry

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00

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ovis

ion

of s

uppo

rt fo

r pro

ject

s, in

itiativ

es a

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ties

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ublic

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tere

st.

Kau

no K

ogen

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inė

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thua

nia

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idia

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51.0

0 49

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g su

pply

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F-57

245496 Olive pp138-imp 27/06/2017 09:22 Page 57

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

150

AN

NU

AL R

EPO

RT 2

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|

The

Gro

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ctur

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at 3

1 D

ecem

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mp

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am

e

Co

un

try o

f b

usin

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Co

mp

an

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Gro

up

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ve

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ners

hip

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tere

st,

% (

eq

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to p

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f vo

tin

g r

igh

ts)

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n-c

on

tro

llin

g

inte

rest's e

ffecti

ve

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hip

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tere

st,

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file

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ac

tivit

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uvos

Ene

rgija

UAB

Li

thua

nia

Pare

nt c

ompa

ny

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Hold

ing

com

pany

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etuv

os E

nerg

ijos

Gam

yba

AB

Lith

uani

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bsid

iary

96

.13

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El

ectri

city

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ratio

n, s

uppl

y, im

port,

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ort a

nd tr

ade

LEST

O A

B Li

thua

nia

Subs

idia

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94.3

9 5.

61

Elec

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pply

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to e

nd u

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Liet

uvos

Duj

os A

B Li

thua

nia

Subs

idia

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96.6

4 3.

36

Prov

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n of

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ural

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dist

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B Li

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nia

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idia

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100.

00

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spos

ition

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al e

stat

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ther

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leas

e of

mot

or v

ehicl

es a

nd p

rovi

sion

of r

elat

ed s

ervi

ces

Duo

men

ų Lo

gist

ikos

Cen

tras

UAB

Li

thua

nia

Subs

idia

ry

79.6

4 20

.36

IT a

nd te

leco

mm

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tion

supp

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ervi

ces

Elek

tros

Tink

lo P

asla

ugos

UAB

Li

thua

nia

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idia

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100.

00

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nstru

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n, re

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lect

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work

s an

d re

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d eq

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n of

cus

tom

ers

to th

e gr

id

Kaun

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s UA

B Li

thua

nia

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idia

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00

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pairs

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man

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LI

TGAS

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Li

thua

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ly of

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lekt

roni

nių

Mok

ėjim

ų A

gent

ūra

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mer

ly

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litas

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Li

thua

nia

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idia

ry

100.

00

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ovis

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of p

aym

ent c

olle

ctio

n se

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s En

ergi

jos

Tiek

imas

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Li

thua

nia

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idia

ry

100.

00

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pply

of e

lect

ricity

and

nat

ural

gas

E

nerg

etik

ų M

okym

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entra

s VŠ

Į Li

thua

nia

Subs

idia

ry

100.

00

- Pr

ofes

sion

al tr

aini

ng a

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evel

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ent o

f ene

rgy

spec

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ts

Get

on E

nerg

y O

U Es

toni

a In

dire

ctly

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rolle

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Get

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nerg

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dire

ctly

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Elec

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pply

Tech

nolo

gijų

ir In

ovac

ijų C

entra

s UA

B Li

thua

nia

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idia

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97.8

0 2.

20

IT a

nd te

leco

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ervi

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VAE

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Lith

uani

a Su

bsid

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0.00

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Busin

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evel

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nucle

ar p

ower

pla

nt p

roje

ct in

Visa

gina

s

Vers

lo A

ptar

navi

mo

Cent

ras

UAB

Lith

uani

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bsid

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97

.00

3.00

Pu

blic

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g an

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n se

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Liet

uvos

Duj

ų Ti

ekim

as U

AB

Lith

uani

a Su

bsid

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to e

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an E

nerg

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ppor

t Fun

d Li

thua

nia

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idia

ry

100.

00

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ovis

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of s

uppo

rt fo

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ject

s, in

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in

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st

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iaus

Kog

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acin

ė Jė

gain

ė U

AB

Lith

uani

a Su

bsid

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10

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no K

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thua

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idia

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00

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Gro

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F-58

245496 Olive pp138-imp 27/06/2017 09:22 Page 58

NO

TE

S T

O T

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FIN

AN

CIA

L S

TA

TE

ME

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Fo

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29

5

-

-

295

51

.00

Liet

uvos

Ene

rgija

Sup

port

Fund

3

-

-

3

10

0.00

V

ilnia

us K

ogen

erac

inė

Jėga

inė

UA

B

1,00

4

-

-

1,00

4

100.

00

Kau

no K

ogen

erac

inė

Jėga

inė

UA

B

3

-

-

3

100.

00

1,1

44,1

00

(4

2,1

28)

314

1,1

02,2

86

F-59

245496 Olive pp138-imp 27/06/2017 09:22 Page 59

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

152

AN

NU

AL R

EPO

RT 2

016

|

The

Gro

up's

inve

stm

ents

in a

ssoc

iate

s an

d jo

int v

entu

res

as a

t 31

Dece

mbe

r 201

6 an

d 20

15 w

ere

as

follo

ws:

Gro

up

2016

2015

Carr

yin

g

am

ou

nt

Gro

up’s

in

tere

st

held

(%

)

C

arr

yin

g

am

ou

nt

Gro

up’s

in

tere

st

held

(%

)

G

eote

rma

UAB

2,

142

23.4

4

2,14

2 23

.44

To

tal

2,1

42

2,1

42

G

roup

’s s

hare

of l

oss

of a

ssoc

iate

s

(2,1

42)

(2,1

42)

C

arr

yin

g a

mo

un

t -

-

As a

t 31

Dec

embe

r 201

6, th

e G

roup

did

not

acc

ount

for i

ts s

hare

of l

oss

of a

ssoc

iate

Geo

term

a UA

B,

beca

use

amou

nt o

f los

s ex

ceed

ed th

e G

roup

's co

st o

f inv

estm

ent.

The

shar

e of

loss

not

reco

gnis

ed

amou

nted

to E

UR 4

38 th

ousa

nd (2

015:

EU

R 3

31 th

ousa

nd).

The

tabl

e be

low

pres

ents

the

finan

cial

pos

ition

and

finan

cial p

erfo

rman

ce re

sults

of a

ssoc

iate

s as

at

and

for t

he y

ear e

nded

31

Dec

embe

r 201

6 (u

naud

ited)

:

As

se

ts

L

iab

ilit

ies

Sale

s

reven

ue

N

et

pro

fit/

(lo

ss)

for

the y

ear

Geo

term

a U

AB

6,04

2

7,39

0

1,22

8

(456

) Th

e ta

ble

belo

w pr

esen

ts th

e fin

anci

al p

ositio

n an

d fin

ancia

l per

form

ance

resu

lts o

f ass

ocia

tes

as a

t an

d fo

r the

yea

r end

ed 3

1 D

ecem

ber 2

015

(una

udite

d):

As

se

ts

L

iab

ilit

ies

Sale

s

reven

ue

N

et

pro

fit/

(lo

ss)

for

the y

ear

Geo

term

a U

AB

7,03

7

7,78

2

1,25

2

(329

)

F-60

245496 Olive pp138-imp 27/06/2017 09:22 Page 60

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

153

AN

NU

AL R

EPO

RT 2

016

|

Sum

mar

ized

stat

emen

t of f

inan

cial

pos

ition

of th

e G

roup

com

pani

es th

at h

as n

on-c

ontro

lling

inte

rest

s as

at 3

1 D

ecem

ber 2

016

and

2015

:

Co

mp

an

y n

am

e

C

urr

en

t a

ss

ets

an

d lia

bil

itie

s

N

on

-cu

rren

t a

ss

ets

an

d lia

bilit

ies

Net

assets

Y

ear

A

sse

ts

Lia

bil

itie

s

To

tal

net

cu

rre

nt

ass

ets

Asse

ts

Lia

bil

itie

s

To

tal

net

no

n-

cu

rre

nt

as

sets

A

B E

nerg

ijo

s S

kir

sty

mo

Op

era

tori

us 1

31

Dec

embe

r 201

6

80,8

86

(182

,514

) (1

01,6

28)

99

5,39

2 (2

43,7

16)

751,

676

65

0,04

8 31

Dec

embe

r 201

5

137,

423

(211

,443

) (7

4,02

0)

90

3,42

7 (2

27,0

01)

676,

426

60

2,40

6 L

ietu

vo

s E

nerg

ijo

s G

am

yb

a A

B

31

Dec

embe

r 201

6 15

0,91

0 (4

7,33

4)

103,

576

66

8,52

0 (4

16,5

30)

251,

990

35

5,56

6 31

Dec

embe

r 201

5

129,

658

(54,

741)

74

,917

703,

816

(435

,833

) 26

7,98

3

342,

900

UA

B E

UR

AK

RA

S

31 D

ecem

ber 2

016

4,

657

(2,6

96)

1,96

1

44,9

05

(25,

544)

19

,361

21,3

22

31 D

ecem

ber 2

015

- -

-

- -

-

- Te

chno

logi

jų ir

Inov

acijų

Cen

tras

UA

B

31 D

ecem

ber 2

016

2,

979

(3,2

21)

(242

)

7,18

0 (4

7)

7,13

3

6,89

1 31

Dec

embe

r 201

5

4,39

7 (2

,936

) 1,

461

5,

262

(39)

5,

223

6,

684

Duo

men

ų Lo

gist

ikos

Cen

tras

UA

B

31 D

ecem

ber 2

016

99

5 (1

,353

) (3

58)

5,

278

(335

) 4,

943

4,

585

31 D

ecem

ber 2

015

2,53

4 (3

,576

) (1

,042

)

5,83

7 (4

08)

5,42

9

4,38

7 L

ITG

AS

UA

B

31 D

ecem

ber 2

016

48,

397

(2

3,69

7)

24,7

00

30

-

30

24

,730

31

Dec

embe

r 201

5

46,3

58

(29,

331)

17

,027

33

- 33

17,0

60

Vers

lo A

pta

rnavim

o C

en

tras U

AB

31 D

ecem

ber 2

016

2,

443

(1,7

88)

655

72

-

72

727

31 D

ecem

ber 2

015

1,

067

(637

) 43

0

35

- 35

465

Kau

no K

ogen

erac

inė

Jėga

inė

UA

B

31 D

ecem

ber 2

016

6,

248

(328

) 5,

920

4,

703

- 4,

703

10

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31

Dec

embe

r 201

5

2 -

2

- -

- 2

(1

) Dat

a as

at 3

1 D

ecem

ber 2

015

cove

r the

item

s fro

m th

e st

atem

ents

of f

inan

cial

pos

ition

s of

LES

TO A

B an

d Li

etuv

os D

ujos

AB.

(2

) Dat

a as

at 3

1 D

ecem

ber 2

015

cove

r the

item

s fro

m th

e st

atem

ents

of f

inan

cial

pos

ition

s of

ELE

KTR

OS

TIN

KLO

PAS

LAU

GO

S U

AB a

nd K

auno

Ene

rget

ikos

Rem

onta

s U

AB.

The

tabl

e ab

ove

is pr

epar

ed b

ased

on

the

finan

cial

sta

tem

ents

of s

ubsi

diar

ies

adju

sted

for c

onso

lidat

ion

purp

oses

and

pre

sent

s da

ta b

efor

e in

terc

ompa

ny e

limin

atio

ns.

F-61

245496 Olive pp138-imp 27/06/2017 09:22 Page 61

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

154

AN

NU

AL R

EPO

RT 2

016

|

Sum

mar

ized

stat

emen

t of p

rofit

or l

oss

and

othe

r com

preh

ensi

ve in

com

e of

the

Gro

up c

ompa

nies

that

has

non

-con

trollin

g in

tere

sts

for 2

016

and

2015

:

Co

mp

an

y n

am

e/ Y

ear

Reve

nu

e

Pro

fit

(lo

ss)

be

fore

in

co

me t

ax

Inc

om

e t

ax

ex

pe

nse

(b

en

efi

t)

Net

pro

fit

(lo

ss)

fro

m c

on

tin

uin

g

op

era

tio

ns

Oth

er

co

mp

reh

en

siv

e

inc

om

e (

los

s)

To

tal

co

mp

reh

en

siv

e

inc

om

e (

los

s)

for

the y

ear

Pro

fit

(lo

ss)

att

rib

uta

ble

to

no

n-c

on

tro

llin

g

inte

res

t

Div

ide

nd

s p

aid

to

n

on

-co

ntr

ollin

g

inte

res

t

En

erg

ijo

s S

kir

sty

mo

Op

era

tori

us A

B 1

2016

647,4

25

10

5,40

0 (1

4,63

8)

90,7

62

- 90,7

62

4,

554

2,16

4 20

15

635,9

66

99

,266

(1

4,80

5)

84,4

61

443

84,9

04

4,

421

3,18

4 L

ietu

vo

s E

nerg

ijo

s G

am

yb

a A

B

2016

172,9

22

48,3

30

(8,3

55)

39,9

75

- 39,9

75

1,39

6 88

7 20

15

214,3

95

3,88

9 (4

,120

) (2

31)

- (2

31

) (9

) 94

3 E

UR

AK

RA

S U

AB

20

16

4,9

84

1,

584

80

1,66

4 -

1,4

93

37

3 -

2015

-

- -

- -

- -

- Te

chno

logi

jų ir

Inov

acijų

Cen

tras

UA

B

2016

14,5

00

311

95

406

- 406

9 -

2015

14,3

62

531

(74)

45

7 -

457

10

- D

uom

enų

Logi

stik

os C

entr

as U

AB

20

16

4,3

59

166

(7)

159

- 159

41

- 20

15

4,8

93

(149

) (1

2)

(161

) -

(16

1)

(33)

63

L

ITG

AS

UA

B

2016

101,7

81

10,4

15

(1,5

51)

8,86

4 -

8,8

64

- 39

8 20

15

209,2

94

5,79

6 (8

73)

4,92

3 -

4,9

23

1,64

1 -

Vers

lo A

pta

rnavim

o C

en

tras U

AB

2016

9,7

24

314

(52)

26

2 -

262

8 -

2015

3,8

26

53

12

65

- 65

2 -

Kau

no K

ogen

erac

inė

Jėga

inė

UA

B

20

16

- (1

57)

22

(135

) -

(13

5)

- -

2015

-

(2)

- (2

) -

(2)

- -

(1) D

ata

as a

t 31

Dec

embe

r 201

5 co

ver t

he it

ems

from

the

stat

emen

ts o

f fin

anci

al p

ositi

ons

of L

ESTO

AB

and

Liet

uvos

Duj

os A

B.

(2) D

ata

as a

t 31

Dec

embe

r 201

5 co

ver t

he it

ems

from

the

stat

emen

ts o

f fin

anci

al p

ositi

ons

of E

LEKT

RO

S TI

NKL

O P

ASLA

UG

OS

UAB

and

Kau

no E

nerg

etik

os R

emon

tas

UAB

.

The

tabl

e ab

ove

is pr

epar

ed b

ased

on

the

finan

cial

sta

tem

ents

of s

ubsi

diar

ies

adju

sted

for c

onso

lidat

ion

purp

oses

and

pre

sent

s da

ta b

efor

e in

terc

ompa

ny e

limin

atio

ns.

F-62

245496 Olive pp138-imp 27/06/2017 09:22 Page 62

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

155

AN

NU

AL R

EPO

RT 2

016

|

Sum

mar

ized

stat

emen

t of c

ash

flows

of t

he G

roup

com

pani

es th

at h

as n

on-c

ontro

lling

inte

rest

s fo

r the

yea

rs 2

016

and

2015

: (1

) Dat

a as

at 3

1 D

ecem

ber 2

015

cove

r the

item

s fro

m th

e st

atem

ents

of f

inan

cial

pos

ition

s of

LES

TO A

B an

d Li

etuv

os D

ujos

AB.

(2

) Dat

a as

at 3

1 D

ecem

ber 2

015

cove

r the

item

s fro

m th

e st

atem

ents

of f

inan

cial

pos

ition

s of

ELE

KTR

OS

TIN

KLO

PAS

LAU

GO

S U

AB a

nd K

auno

Ene

rget

ikos

Rem

onta

s U

AB.

The

tabl

e ab

ove

is pr

epar

ed b

ased

on

the

finan

cial

sta

tem

ents

of s

ubsi

diar

ies

adju

sted

for c

onso

lidat

ion

purp

oses

and

pre

sent

s da

ta b

efor

e in

terc

ompa

ny e

limin

atio

ns.

Com

pany

nam

e/ Y

ear

Cas

h f

low

s

fro

m o

pera

tin

g

acti

vit

ies

Inc

om

e t

ax

(paid

)

reco

vere

d

Net

ca

sh

flo

ws

fr

om

op

era

tin

g

acti

vit

ies

Net

ca

sh

flo

ws

fr

om

in

vesti

ng

acti

vit

ies

Net

ca

sh

flo

ws

fr

om

fin

an

cin

g

acti

vit

ies

Net

incre

ase

(decre

ase

) in

cas

h f

low

s

Cas

h a

nd

cas

h

eq

uiv

ale

nts

at

the b

eg

inn

ing

o

f th

e y

ear

Cas

h a

nd

cas

h

eq

uiv

ale

nts

at

the e

nd

of

the

ye

ar

En

erg

ijo

s S

kir

sty

mo

Op

era

tori

us A

B

20

16

180,

180

(36)

18

0,14

4 (1

23,7

94)

(51,

524)

4,

826

5,83

6 10

,662

20

15

148,

149

(9,7

65)

138,

384

(86,

132)

(5

7,46

6)

(5,2

14)

11,0

50

5,83

6 L

ietu

vo

s E

nerg

ijo

s G

am

yb

a A

B

2016

60

,513

-

60,5

13

14,4

99

(42,

143)

32

,869

66

,176

99

,045

20

15

27,1

93

(1,8

29)

25,3

64

8,59

7 (4

3,53

5)

(9,5

74)

75,7

50

66,1

76

EU

RA

KR

AS

UA

B

2016

2,

828

- 2,

828

(1,7

66)

680

1,74

2 58

0 2,

322

2015

-

- -

- -

- -

- Te

chno

logi

jų ir

Inov

acijų

Cen

tras

UA

B

2016

2,

782

(162

) 2,

620

(2,9

82)

(202

) (5

64)

862

298

2015

2,

649

(377

) 2,

272

(1,6

77)

478

1,07

3 (2

11)

862

Duo

men

ų Lo

gist

ikos

Cen

tras

UA

B

2016

1,

495

- 1,

495

(227

) (2

,391

) (1

,123

) 1,

474

351

2015

1,

216

- 1,

216

(2)

(632

) 58

2 89

2 1,

474

LIT

GA

S U

AB

20

16

29,7

78

(896

) 28

,882

1

(2,4

36)

26,4

47

(16,

636)

9,

811

2015

(1

9,36

7)

- (1

9,36

7)

- (2

,105

) (2

1,47

2)

4,83

6 (1

6,63

6)

Vers

lo A

pta

rnavim

o C

en

tras U

AB

20

16

175

(25)

15

0 -

(2)

148

379

527

2015

57

-

57

(3)

31

85

294

379

Kau

no K

ogen

erac

inė

Jėga

inė

UA

B

2016

(1

50)

- (1

50)

(524

) 6,

802

6,12

8 2

6,13

0 20

15

(1)

- (1

) -

3 2

- 2

F-63

245496 Olive pp138-imp 27/06/2017 09:22 Page 63

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

156

AN

NU

AL R

EPO

RT 2

016

|

9 Am

ount

s re

ceiva

ble

afte

r one

yea

r Am

ount

s re

ceiva

ble

afte

r one

yea

r con

sist

of a

s fo

llows

:

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Amou

nt re

ceiva

ble

on d

ispo

sal o

f Litg

rid A

B

(Not

es 4

,13,

39)

193,

571

209,

975

19

3,57

1 20

9,97

5 Fi

nanc

ial le

ase

(Not

e 14

) 7,

600

1,93

8

- -

Dep

osite

d gu

aran

tees

94

3 94

1

Unb

illed

accr

ued

reve

nue

from

ele

ctric

ity-re

late

d sa

les

(Not

e 4)

24

6 53

3

- -

Amou

nts

rece

ivabl

e on

em

issi

on a

llowa

nces

lent

15

7 21

4 -

- Lo

an g

rant

ed

599

29,7

38

2,

900

29,0

00

Oth

er n

on-c

urre

nt re

ceiva

bles

1,

388

2,17

6

40

- T

ota

l 204,5

00

245,5

15

196,5

11

238,9

75

Less

: im

pairm

ent a

llowa

nce

(922

) (1

,089

)

- -

Carr

yin

g a

mo

un

t 203,5

82

244,4

26

196,5

11

238,9

75

Info

rmat

ion

on th

e fa

ir va

lue

of a

mou

nt re

ceiva

ble

from

EPS

O-G

on

disp

osal

of L

itgrid

AB

is pr

esen

ted

in N

ote

3.1.

The

key

term

s of

the

amou

nt re

ceiva

ble

from

EPS

O-G

on

disp

osal

of L

itgrid

AB

were

re

viewe

d in

201

4 an

d 20

16 in

rela

tion

to re

paym

ent t

erm

s an

d va

riabl

e pa

rt of

inte

rest

rate

. Int

eres

t ra

te is

bas

ed o

n 1

year

EU

RIB

OR

. Ac

cord

ing

to a

gree

men

t bet

ween

the

Com

pany

and

EPS

O-G

dur

ing

2017

-202

1 pe

riod

EPS

O-G

will

pay

EUR

79,

607

thou

sand

and

fin

al r

epay

men

t of

EU

R 13

0,36

8 th

ousa

nd (

subj

ect

to f

inal

re

calc

ulat

ion

of th

e pr

ice p

rem

ium

) will

take

pla

ce in

202

2. T

he n

on-c

urre

nt a

mou

nt r

ecei

vabl

e is

pr

esen

ted

net o

f Con

tinge

nt c

onsi

dera

tion

(Not

e 4)

whi

ch h

ad n

egat

ive v

alue

of E

UR

4,1

82 th

ousa

nd

as a

t 31

Dec

embe

r 201

6 (z

ero

as a

t 31

Dec

embe

r 201

5)

Dur

ing

2016

the

Com

pany

ext

ende

d re

paym

ent t

erm

of l

oan

prov

ided

to s

ubsi

diar

y UA

B "E

nerg

etiko

s pa

slau

gų ir

rang

os o

rgan

izac

ija" w

ith th

e ca

rryin

g va

lue

at 3

1 D

ecem

ber 2

016

of E

UR

2,9

40 th

ousa

nd

incl

udin

g EU

R 4

0 th

ousa

nd a

ccru

ed in

tere

st re

ceiva

ble.

At

31

Dec

embe

r 20

15 th

e C

ompa

ny a

nd th

e G

roup

acc

ount

ed fo

r EU

R 2

9,00

0 th

ousa

nd o

f loa

n re

ceiva

ble

from

EPS

O-G

UAB

that

was

sch

edul

ed fo

r rep

aym

ent a

t 31

May

201

8. In

tere

st ra

te o

f loa

n wa

s ba

sed

on 1

yea

r EU

RIB

OR

. Dur

ing

first

hal

f of 2

016.

UAB

"EPS

O-G

" pre

mat

urel

y re

paid

the

EUR

29,0

00 t

hous

and

loan

, an

d re

ceiv

ed p

roce

ed a

re a

ccou

nted

for

as

“Loa

n re

paym

ents

rec

eive

d” in

st

atem

ent o

f cas

h flo

ws.

Mov

emen

ts o

n th

e im

pairm

ent a

llowa

nce

of a

mou

nts

rece

ivabl

e du

ring

the

year

s en

ded

31 D

ecem

ber

2016

and

201

5.

Gro

up

Co

mp

an

y

2016

2015

2016

2015

At

1 J

an

uary

1

,089

1,2

42

-

-

Impa

irmen

t 11

-

-

- R

ever

sal o

f im

pairm

ent

( 178

)

(153

)

-

- A

t 31 D

ecem

ber

922

1,0

89

-

-

10 O

ther

non

-cur

rent

ass

ets

Oth

er n

on-c

urre

nt a

sset

s co

nsist

of a

s fo

llows

:

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Righ

t to

rec

eive

em

issio

n al

lowa

nces

in

futu

re

3,28

8 5,

087

-

-

Less

: im

pairm

ent

(668

) (1

,799

)

-

- C

arr

yin

g a

mo

un

t 2,6

20

3,2

88

-

-

As a

t 31

Dec

embe

r 20

11,

400,

000

emiss

ion

allo

wanc

es w

ere

lent

und

er t

he t

erm

s of

a le

ndin

g ag

reem

ent c

oncl

uded

on

1 D

ecem

ber 2

009

with

STX

Ser

vices

BV.

The

agr

eem

ent e

xpire

s in

202

1.

On

16 A

pril

2012

, add

itiona

l 650

,000

em

issio

n al

lowa

nces

wer

e le

nt u

nder

the

term

s of

a le

ndin

g ag

reem

ent s

igne

d on

13

April

201

2 wi

th C

F pa

rtner

s (U

K) L

LP. O

n 7

April

201

5, C

F Pa

rtner

s (U

K)

LLP

retu

rned

650

,000

em

issi

on a

llowa

nces

. Im

pairm

ent o

f em

issio

n al

lowa

nces

was

est

imat

ed w

ith

refe

renc

e to

the

mar

ket p

rices

of e

mis

sion

allo

wanc

es a

s at

31

Dec

embe

r 201

6 an

d 20

15.

11 In

vent

orie

s G

rou

p

C

om

pa

ny

2016

2015

2016

2015

N

atur

al g

as

28,5

14

29

,471

-

- C

onsu

mab

les,

raw

mat

eria

ls an

d sp

are

parts

6,

772

5,

979

-

-

Elec

tricit

y an

d ga

s m

eter

s

-

775

-

-

Hea

vy fu

el o

il 5,

025

5,

519

-

-

Oth

er

961

1,

110

-

-

Tota

l 41

,272

42,8

54

-

-

Less

: writ

e-do

wn a

llowa

nce

(3,1

55)

(2

,880

)

-

- C

arr

yin

g a

mo

un

t 38,1

17

39,9

74

-

-

As fr

om 2

016

the

Gro

up c

lass

ifies

elec

tricit

y an

d ga

s m

eter

s in

the

cate

gory

of p

rope

rty, p

lant

and

eq

uipm

ent.

As a

resu

lt, th

e el

ectri

city

met

ers

that

wer

e cl

assif

ied

in th

e ca

tego

ry o

f inv

ento

ries

as a

t 31

Dec

embe

r 201

5 we

re re

clas

sifie

d to

pro

perty

, pla

nt a

nd e

quip

men

t.

F-64

245496 Olive pp138-imp 27/06/2017 09:22 Page 64

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

157

AN

NU

AL R

EPO

RT 2

016

|

The

Gro

up's

inve

ntor

ies

expe

nsed

dur

ing

the

year

end

ed 3

1 D

ecem

ber 2

016

were

as

follo

ws:

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Nat

ural

gas

25

0,73

5

355,

471

-

-

Hea

vy fu

el o

il 49

4

1,91

6

-

- O

ther

inve

ntor

ies

17,6

50

16

,500

-

- T

ota

l 268,8

79

373,8

87

-

-

Inve

ntor

ies

expe

nsed

in 2

016

decr

ease

d co

mpa

red

to 2

015

as a

resu

lt of

re-n

egot

iate

d ag

reem

ent

with

Sta

toil A

SA le

adin

g to

lowe

r ann

ual L

NG

acq

uisit

ion

and

real

izat

ion

volu

mes

and

lowe

r pric

es.

Mov

emen

ts o

n th

e ac

coun

t of i

nven

tory

writ

e-do

wn to

net

real

isab

le v

alue

dur

ing

2016

and

201

5 we

re

as fo

llows

:

G

rou

p

C

om

pa

ny

2016

2015

2015

2014

Carr

yin

g a

mo

un

t at

1 J

an

uary

2,8

80

3,9

57

-

-

Addi

tiona

l impa

irmen

t 40

0

106

-

-

Rev

ersa

l of i

mpa

irmen

t (1

25)

(1

,183

)

-

- C

arr

yin

g a

mo

un

t at

31 D

ecem

ber

3,1

55

2,8

80

-

-

The

acqu

isitio

n co

st o

f the

Gro

up's

inve

ntor

ies

carri

ed a

t net

real

isab

le v

alue

as

at 3

1 D

ecem

ber 2

016

amou

nted

to E

UR 4

,436

thou

sand

(31

Dec

embe

r 201

5: E

UR

16,

964

thou

sand

). M

ovem

ents

on

the

acco

unt o

f inv

ento

ry w

rite-

down

to n

et r

ealis

able

val

ue w

ere

reco

gnis

ed in

the

stat

emen

t of c

ompr

ehen

sive

inco

me

with

in 'O

ther

exp

ense

s'.

As a

t 31

Dec

embe

r 201

6, n

o in

vent

orie

s ha

d be

en p

ledg

ed b

y th

e Co

mpa

ny a

nd th

e G

roup

. As

at 3

1 D

ecem

ber 2

015,

the

Com

pany

's su

bsid

iary

LIT

GAS

UAB

had

ple

dged

to S

wedb

ank

AB a

ll its

cur

rent

in

vent

orie

s of

goo

ds a

nd a

ll rig

hts

of c

laim

aris

ing

from

sal

e of

liqu

efie

d na

tura

l gas

, as

an a

sset

co

mpl

ex.

As a

t 31

Dec

embe

r 201

5, th

e G

roup

's in

vent

orie

s pl

edge

d as

col

late

ral a

mou

nted

to E

UR

20,0

00 th

ousa

nd (N

ote

19).

The

Gro

up‘s

and

the

Com

pany

‘s p

repa

ymen

ts a

s at

31

Dec

embe

r 201

6 an

d 20

15 w

ere

as fo

llow

s:

Gro

up

Co

mp

an

y

2016

2015

2016

2015

Prep

aym

ents

for n

atur

al g

as

101

28

,200

-

- D

epos

its re

late

d to

pow

er e

xcha

nge

4,53

9

8,66

9

-

- Pr

epai

d ex

pens

es

901

1,

154

4

1

Prep

aym

ents

for s

ervic

es

1,11

0

249

7

5

Paym

ent f

or s

hare

cap

ital is

sue

of V

ilnia

us

Koge

nera

cinė

Jėg

ainė

UAB

(Not

e 8)

-

-

5,

000

-

Oth

er p

repa

ymen

ts

316

1,

898

-

-

To

tal

6,9

67

40,1

70

5,0

11

6

As a

t 31

Dec

embe

r 201

5, th

e G

roup

‘s p

repa

ymen

ts m

ostly

con

sist

ed o

f pre

paym

ents

for n

atur

al g

as

of s

ubsi

diar

y Li

etuv

os D

ujų

Tiek

imas

UAB

in a

mou

nt o

f EUR

26,

9 m

illion

rel

atin

g to

the

min

imum

qu

antit

y of

nat

ural

gas

not

con

sum

ed d

urin

g 20

14. T

his

quan

tity

of n

atur

al g

as w

as c

onsu

med

by

Liet

uvos

Duj

ų Ti

ekim

as U

AB d

urin

g 20

16,

ther

eby

lead

ing

to s

igni

fican

tly l

ower

am

ount

of

prep

aym

ents

for n

atur

al g

as a

s at

31

Dec

embe

r 201

6.

12 T

rade

rece

ivabl

es

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Rec

eiva

bles

on

sale

s of

ele

ctric

ity in

Lith

uani

a 76

,941

69

,706

- -

Rec

eiva

bles

on

sa

les

of

gas

from

no

n-ho

useh

old

user

s 30

,907

30

,577

- -

Rec

eiva

bles

on

sale

s of

gas

from

hou

seho

ld

user

s 2,

887

2,56

3

- -

Rec

eiva

bles

on

cont

ract

wor

ks

1,96

0 4,

320

R

ecei

vabl

e fo

r the

sal

es o

f hea

t 1,

574

1,68

9

Rec

eiva

ble

for r

ent o

f pro

perty

1,

508

1,24

5

Rec

eiva

bles

on

ex

ports

of

el

ectri

city

an

d

elec

trici

ty m

anuf

actu

red

abro

ad

1,22

8 25

3

Rec

eiva

bles

for

inf

orm

atio

n te

chno

logy

and

te

leco

mm

unica

tions

ser

vice

s 73

5 86

8

Oth

er tr

ade

rece

ivabl

es

5,21

9 8,

823

-

- To

tal

122,9

59

120,0

44

-

- Le

ss: i

mpa

irmen

t of t

rade

rece

ivabl

es

(11,

075)

(1

2,97

8)

-

- C

arr

yin

g a

mo

un

t 111,8

84

107,0

66

-

-

As

at 3

1 D

ecem

ber 2

016,

Lie

tuvo

s D

ujų

Tiek

imas

UA

B ha

d a

cred

it ag

reem

ent w

ith A

B SE

B ba

nk fo

r th

e m

axim

um c

redi

t am

ount

of E

UR

30

milli

on. A

s at

31

Dec

embe

r 20

16, a

mou

nt o

f EU

R 1

,207

th

ousa

nd w

as w

ithdr

awn

as a

sec

urity

und

er th

e ag

reem

ent p

erfo

rman

ce g

uara

ntee

issu

ed b

y AB

SE

B ba

nk. D

eadl

ine

for t

he re

paym

ent o

f cre

dit i

s 31

Dec

embe

r 201

7. T

o se

cure

the

repa

ymen

t of

cred

it, L

ietu

vos

Duj

ų Ti

ekim

as U

AB p

ledg

ed to

the

bank

– a

ll cla

im ri

ghts

aga

inst

am

ount

s re

ceiva

ble

unde

r the

agr

eem

ent o

n su

pply

of n

atur

al g

as. T

he m

axim

um a

mou

nt th

at c

an b

e pl

edge

d is

EUR

9.0

m

illion

. M

ovem

ents

on

the

acco

unt o

f pro

visio

n fo

r im

pairm

ent d

urin

g 20

16 a

nd 2

015

were

as

follo

ws:

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

At

1 J

an

uary

12,9

78

14,3

91

-

-

Impa

irmen

t cha

rge

for t

he y

ear

1,38

1 2,

009

-

- (R

ever

sal)

of im

pairm

ent

(3,2

84)

(3,4

22)

-

- A

t 31 D

ecem

ber

11,0

75

12,9

78

-

-

Impa

irmen

t of r

ecei

vabl

es w

as re

cogn

ised

in th

e st

atem

ent o

f com

preh

ensi

ve in

com

e wi

thin

'Oth

er

expe

nses

'.

F-65

245496 Olive pp138-imp 27/06/2017 09:22 Page 65

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

158

AN

NU

AL R

EPO

RT 2

016

|

The

tabl

e be

low

pres

ents

the

agei

ng a

nalys

is o

f tra

de re

ceiva

bles

that

wer

e no

t ide

ntifi

ed a

s do

ubtfu

l:

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Not

pas

t due

99

,703

89,8

96

-

-

Up

to 3

0 da

ys

5,03

4

7,92

3

-

- 30

-60

days

1,

635

2,

186

-

-

60–9

0 da

ys

614

95

4

-

- 90

-120

day

s 30

6

381

-

-

Ove

r 120

day

s 4,

592

5,

726

-

-

Carr

yin

g a

mo

un

t 111,8

84

107,0

66

-

-

The

fair

valu

es o

f tra

de re

ceiva

bles

as

at 3

1 D

ecem

ber 2

016

and

2015

app

roxim

ated

thei

r car

ryin

g am

ount

.

13 O

ther

am

ount

s re

ceiva

ble

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Valu

e ad

ded

tax

5,

412

5,61

1

- 21

1 U

nbille

d ac

crue

d re

venu

e fro

m e

lect

ricity

sa

les

(inclu

ding

rela

ted

VAT)

6,

121

5,28

6

- -

Accr

ued

reve

nue

for g

as

- 5,

061

-

- C

urre

nt p

ortio

n of

fina

nce

leas

e 1,

990

1,32

4

- -

Amou

nt re

ceiva

ble

on d

ispo

sal o

f Litg

rid A

B (N

otes

4,9

,39)

12

,222

-

12

,222

-

Amou

nt re

ceiva

ble

on re

visio

n of

Kau

no e

nerg

etik

os

rem

onta

s U

AB s

hare

s pr

ice (N

otes

4,3

1)

- -

1,

056

- O

ther

am

ount

s re

ceiva

ble

3,90

5 3,

944

1,

016

4,54

9 T

ota

l 29,6

50

21,2

26

14,2

94

4,7

60

Less

: im

pairm

ent f

or o

ther

am

ount

s re

ceiva

ble

(287

) (2

49)

-

- C

arr

yin

g a

mo

un

t 29,3

63

20,9

77

14,2

94

4,7

60

The

fair

valu

e of

oth

er a

mou

nts

rece

ivabl

e as

at 3

1 D

ecem

ber 2

016

and

2015

app

roxim

ated

thei

r ca

rryin

g am

ount

.

14 F

inan

ce le

ase

The

tabl

e be

low

pre

sent

s an

alys

is o

f the

Gro

up’s

fina

ncia

l lea

se re

ceiva

bles

:

G

rou

p

C

om

pa

ny

2015

2016

2015

2015

Min

imal le

ase p

aym

en

ts

Th

e ne

xt y

ear

2,58

2

1,47

3

-

- Ye

ars

2 th

roug

h 5

com

bine

d 5,

789

2,

092

-

-

Beyo

nd fi

ve y

ears

3,

954

-

-

-

To

tal

12,3

25

3,5

65

-

-

Un

earn

ed

fin

an

ce in

co

me

Th

e ne

xt y

ear

(592

)

(149

)

-

- Ye

ars

2 th

roug

h 5

com

bine

d (1

,457

)

(154

)

-

- Be

yond

five

yea

rs

(686

)

-

-

- T

ota

l (2

,73

5)

(3

03)

-

-

To

tal

9,5

90

3,2

62

-

-

Gro

up d

urin

g 20

15 a

nd 2

016

ente

red

into

veh

icle

s re

purc

hase

agr

eem

ents

, tha

t spe

cify

repu

rcha

se

cons

ider

atio

n fo

r veh

icle

s us

ed b

y th

e G

roup

for l

ong-

term

re

ntal

ser

vices

. Rep

urch

ase

amou

nt o

f ve

hicl

e at

31

Dec

embe

r 201

6 is

EU

R 3

,472

thou

sand

(31

Dec

embe

r 201

5 is

EU

R 1

,691

thou

sand

). Pe

riods

for e

xecu

tion

of v

ehicl

es re

purc

hase

agr

eem

ents

are

in ra

nge

from

1 to

5 y

ears

. W

ith re

spec

t to

(1) a

sses

smen

t of i

ncom

e fro

m lo

ng-te

rm le

ase

(2) t

he le

ased

ass

et re

sidu

al v

alue

s at

th

e en

d of

the

leas

e te

rm (3

) the

con

side

ratio

n th

at w

ill be

rece

ived

on re

purc

hase

of v

ehic

les,

in 2

016

recl

assi

ficat

ion

of ta

ngib

le a

sset

s to

the

long

-term

fina

ncia

l leas

ing

amou

nted

to E

UR

7,6

17 th

ousa

nd.

Eur (

2015

- EU

R 1,

957

thou

sand

).

The

Gro

up d

o no

t ear

ns a

ny c

ontin

gent

rent

reve

nue

rela

ted

to fi

nanc

ial le

ase

agre

emen

ts.

F-66

245496 Olive pp138-imp 27/06/2017 09:22 Page 66

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

159

AN

NU

AL R

EPO

RT 2

016

|

15 In

vest

men

ts

As a

t 31

Dec

embe

r 201

6, th

e G

roup

and

the

Com

pany

had

no

long

-term

inve

stm

ents

. A

s at

31

Dec

embe

r 201

6 an

d 20

15, t

he G

roup

’s a

nd th

e C

ompa

ny’s

sho

rt-te

rm in

vest

men

ts c

ompr

ised

as

follo

ws:

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Avai

labl

e-fo

r-sal

e fin

anci

al a

sset

s -

4,

534

-

4,

534

Loan

rece

ivabl

es

-

-

4,70

2

In

tere

st re

ceiv

able

-

27

20

0

27

Carr

yin

g a

mo

un

t -

4,5

61

4,9

02

4,5

61

As

at 3

1 D

ecem

ber 2

015,

the

Gro

up’s

and

the

Com

pany

’s a

vaila

ble-

for-s

ale

finan

cial

ass

ets

cons

isted

of

LTL

-den

omin

ated

Lith

uani

an G

over

nmen

t bon

d th

at w

ere

rede

emed

in 2

016.

As

at 3

1 D

ecem

ber

2015

, the

wei

ghte

d av

erag

e an

nual

inte

rest

rate

on

bond

s wa

s 1.

67%

. D

urin

g 20

16 t

he C

ompa

ny h

as p

rovid

ed a

loan

to

the

subs

idia

ry T

uule

ener

gia

OU

(no

te 3

3),

its

repa

ymen

t dat

e wa

s se

t as

31 D

ecem

ber 2

016

and

in 2

017

the

loan

was

pro

long

ed (n

ote

39).

Fa

ir va

lue

of in

vest

men

ts

As a

t 31

Dec

embe

r 201

5, L

ithua

nian

Gov

ernm

ent b

onds

wer

e st

ated

at f

air v

alue

. The

fair

valu

e of

de

bt s

ecur

ities

was

attr

ibut

ed to

Lev

el 1

in th

e fa

ir va

lue

hier

arch

y an

d it

was

dete

rmin

ed w

ith re

fere

nce

to th

e hi

ghes

t bid

pric

e (in

clud

ing

inte

rest

acc

rued

ther

eon)

offe

red

for t

he re

spec

tive

debt

sec

uritie

s by

one

of t

hree

com

mer

cial

ban

ks in

Lith

uani

a, a

vaila

ble

as a

t 31

Dec

embe

r 201

5.

The

Avai

labl

e-fo

r-sal

e in

vest

men

t was

rede

emed

in 2

016.

16

Cas

h an

d ca

sh e

quiva

lent

s

Gro

up

Co

mp

an

y

2016

2015

2015

2015

Cas

h at

ban

k an

d on

han

d 17

8,56

5

164,

341

73

13,1

79

Carr

yin

g a

mo

un

t 178,5

65

164,3

41

73

13,1

79

For

the

purp

ose

of c

ash

flow

stat

emen

t, ca

sh a

nd c

ash

equi

vale

nts,

and

ban

k ov

erdr

afts

wer

e as

fo

llows

:

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Cas

h an

d ca

sh e

quiva

lent

s

178,

565

16

4,34

1

73

13

,179

Ba

nk o

verd

rafts

-

(4

1,53

1)

-

-

Carr

yin

g a

mo

un

t 178,5

65

122,8

10

73

13,1

79

The

fair

valu

e of

cas

h an

d ca

sh e

quiva

lent

s as

at 3

1 D

ecem

ber 2

016

and

2015

app

roxim

ated

thei

r ca

rryin

g am

ount

. U

nder

the

loan

agr

eem

ents

sig

ned

with

the

bank

s, th

e G

roup

has

ple

dged

cur

rent

and

futu

re c

ash

inflo

ws to

ban

k ac

coun

ts (N

ote

19).

As a

t 31

Dec

embe

r 201

6, th

e ba

lanc

e of

cas

h pl

edge

d am

ount

ed

to E

UR 1

39 th

ousa

nd (3

1 D

ecem

ber 2

015:

EUR

2,4

00 th

ousa

nd).

17 E

quity

A

s at

31

Dec

embe

r 20

16 a

nd 2

015,

the

Com

pany

’s s

hare

cap

ital

amou

nted

to

EU

R 1

,212

,156

th

ousa

nd.

As

at 3

1 D

ecem

ber

2015

, th

e C

ompa

ny’s

sha

re c

apita

l was

div

ided

into

4,1

79,8

49,2

89

ordi

nary

regi

ster

ed s

hare

s wi

th th

e no

min

al v

alue

of E

UR

0.2

9 ea

ch.

As a

t 31

Dec

embe

r 201

6 an

d 20

15, a

ll the

sha

res

were

fully

pai

d up

. Pu

rsua

nt t

o th

e Li

thua

nian

Law

on

Adop

tion

of t

he E

uro

and

the

prov

isio

ns o

f th

e Pr

oced

ure

for

Con

vers

ion

of S

hare

Cap

ital t

o Eu

ros

of t

he C

entra

l Sec

uriti

es D

epos

itory

of

Lith

uani

a (L

ietu

vos

Cen

trini

s V

erty

bini

ų P

opie

rių D

epoz

itoriu

mas

AB

), on

1 J

anua

ry 2

015

the

Com

pany

’s s

hare

cap

ital

was

conv

erte

d to

eur

os. T

he d

iffer

ence

on

conv

ersi

on o

f the

nom

inal

val

ue o

f sha

res

from

LTL

to E

UR

amou

nted

to E

UR

1,5

88 th

ousa

nd, w

hich

was

acc

ount

ed fo

r by

the

Com

pany

in p

rofit

or l

oss

of th

e st

atem

ent o

f com

preh

ensiv

e in

com

e. T

he d

iffer

ence

on

conv

ersi

on w

as re

porte

d wi

thin

fina

nce

cost

s in

the

stat

emen

t of c

ompr

ehen

sive

inco

me.

18

Res

erve

s Le

gal r

eser

ve

The

lega

l res

erve

is a

com

pulso

ry re

serv

e un

der t

he L

ithua

nian

legi

slat

ion.

Com

pani

es in

Lith

uani

a ar

e re

quire

d to

tran

sfer

5%

of n

et p

rofit

from

dist

ribut

able

pro

fit u

ntil

the

tota

l res

erve

reac

hes

10%

of

the

shar

e ca

pita

l. Th

e le

gal r

eser

ve c

anno

t be

used

for t

he p

aym

ent o

f divi

dend

s an

d it

is fo

rmed

to

cove

r fut

ure

loss

es o

nly.

As

at 3

1 D

ecem

ber 2

016,

the

Gro

up's

lega

l res

erve

am

ount

ed to

EUR

34,

696

thou

sand

(31

Dec

embe

r 20

15: E

UR

28,

777

thou

sand

). In

201

6, th

e C

ompa

ny tr

ansf

erre

d EU

R 5

,551

thou

sand

(20

15: E

UR

4,2

07 th

ousa

nd)

to th

e le

gal

rese

rve.

The

Com

pany

's le

gal r

eser

ve a

s at

31

Dec

embe

r 201

6 di

d no

t rea

ched

10%

of t

he s

hare

ca

pita

l.

Reva

luat

ion

rese

rve

The

reva

luat

ion

rese

rve

aris

es fr

om re

valu

atio

n of

pro

perty

, pla

nt a

nd e

quip

men

t due

to in

crea

se in

va

lue.

The

reva

luat

ion

cann

ot b

e us

ed to

cov

er lo

sses

. A

s at

31

Dec

embe

r 20

16, t

he G

roup

’s r

eval

uatio

n re

serv

e am

ount

ed to

EU

R 5

7,47

5 th

ousa

nd (3

1 D

ecem

ber 2

015:

EU

R 6

2,32

3 th

ousa

nd).

Th

is re

serv

e wa

s no

t for

med

by

the

Com

pany

as

com

pany

’s p

rope

rty, p

lant

and

equ

ipm

ent i

s ca

rried

at

cos

t.

Oth

er re

serv

es

Oth

er re

serv

es a

re fo

rmed

on

the

deci

sion

of s

hare

hold

ers

and

can

be re

dist

ribut

ed o

n ap

prop

riatio

n of

nex

t yea

r pro

fits.

No

othe

r res

erve

s we

re fo

rmed

by

the

Gro

up a

s at

31

Dec

embe

r 201

6. A

s at

31

Dec

embe

r 20

15, t

he G

roup

's ot

her

rese

rves

incl

uded

the

chan

ge in

fair

valu

e of

ava

ilabl

e-fo

r-sal

e fin

anci

al a

sset

s am

ount

ing

to E

UR 4

8 th

ousa

nd.

The

Com

pany

acc

ount

s fo

r the

cha

nges

in fa

ir va

lue

of a

vaila

ble-

for-s

ale

finan

cial

ass

ets

with

in o

ther

re

serv

es. N

o ot

her r

eser

ves

were

form

ed b

y th

e C

ompa

ny a

s at

31

Dec

embe

r 201

6 (3

1 D

ecem

ber

2015

: EU

R 4

8 th

ousa

nd).

F-67

245496 Olive pp138-imp 27/06/2017 09:22 Page 67

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

160

AN

NU

AL R

EPO

RT 2

016

|

19 B

orro

wing

s

Gro

up

Co

mp

an

y

2016

2015

2016

2015

No

n-c

urr

en

t

Bank

bor

rowi

ngs

364,

957

27

7,80

5

23,4

40

-

Cu

rren

t

Cur

rent

por

tion

of n

on-c

urre

nt

borro

wing

s 9

0,00

8

99

,023

2,13

1

- C

urre

nt b

orro

wing

s 3

8,94

8

1,

490

64

,759

- Le

tters

of c

redi

t -

20

6

-

- Ba

nk o

verd

rafts

-

41

,531

-

- Ac

crue

d in

tere

st

5

5

- -

To

tal

bo

rro

win

gs

493,9

18

420,0

60

90,3

30

-

All b

orro

wing

s of

the

Gro

up b

ear v

aria

ble

inte

rest

rate

s wi

th re

prici

ng in

terv

als

of u

p to

6 m

onth

s.

In 2

016

the

Com

pany

has

obt

aine

d a

loan

from

SEB

for t

he C

ompa

ny's

busin

ess

deve

lopm

ent f

undi

ng

- the

acq

uisi

tion

of w

ind

farm

s. T

he lo

an is

set

to a

var

iabl

e in

tere

st ra

te, t

he re

view

perio

d is

3 m

onth

s.

The

loan

bal

ance

at 3

1 D

ecem

ber 2

016

is E

UR

25,

571

thou

sand

. Th

e C

ompa

ny's

curre

nt b

orro

wing

s in

clud

e:

a)

Loan

pay

able

to S

EB b

ank

unde

r cre

dit l

ine

agre

emen

t in

amou

nt o

f EU

R 3

8,94

8 th

ousa

nd .

b)

Fu

nds

borro

wed

unde

r an

inte

rcom

pany

bor

rowi

ng a

nd le

ndin

g ag

reem

ent (

Not

e 36

) in

amou

nt o

f Eu

r 25,

811

thou

sand

. N

on-c

urre

nt b

orro

wing

s gr

oupe

d by

mat

urity

:

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Betw

een

1 an

d 2

year

s 1

12,3

41

57

,138

2,1

31

-

Betw

een

2 an

d 5

year

s 1

81,7

93

16

1,05

2

6,3

93

-

Afte

r 5 y

ears

7

0,82

3

59

,615

14,

916

-

To

tal

364,9

57

277,8

05

2

3,4

40

-

The

carry

ing

amou

nts

of th

e G

roup

and

the

Com

pany

bor

rowi

ngs

are

deno

min

ated

in E

uros

. As

at 3

1 D

ecem

ber 2

016

and

2015

, the

fair

valu

e of

bor

rowi

ngs

appr

oxim

ated

thei

r car

ryin

g am

ount

, ex

cept

for b

orro

wing

s of

Lie

tuvo

s En

ergi

jos

Gam

yba

AB w

ith th

e ca

rryin

g am

ount

s of

EU

R 1

32,4

59

thou

sand

and

EU

R 1

45,6

74 th

ousa

nd, r

espe

ctive

ly. T

he fa

ir va

lue

of th

ese

borro

wing

s wa

s ap

prox

. EU

R 1

27,7

43 th

ousa

nd a

s at

31

Dec

embe

r 201

6 (3

1 D

ecem

ber 2

015:

EU

R 1

37,5

90 th

ousa

nd).

The

fair

valu

e wa

s m

easu

red

as p

rese

nt v

alue

of d

iscou

nted

cas

h flo

ws a

t a d

iscou

nt ra

te o

f 2.3

7% (3

1 D

ecem

ber 2

015:

2.4

6%).

The

fair

valu

e of

bor

rowi

ngs

is at

tribu

ted

to L

evel

2 in

the

fair

valu

e hi

erar

chy.

Th

e lo

an a

gree

men

ts c

onta

in f

inan

cial

and

non

-fina

ncia

l co

vena

nts

that

the

ind

ividu

al G

roup

co

mpa

nies

are

obl

iged

to c

ompl

y wi

th. A

ll G

roup

com

pani

es c

ompl

ied

with

the

cove

nant

s as

at 3

1 D

ecem

ber 2

016

and

2015

. To

sec

ure

the

repa

ymen

t of

cer

tain

bor

rowi

ngs,

the

Gro

up h

as p

ledg

ed i

ts p

rope

rty,

plan

t an

d eq

uipm

ent (

Not

e 6)

, inv

ento

ries

(Not

e 11

) and

cas

h ba

lanc

es (N

ote

16).

As a

t 31

Dec

embe

r 201

6, th

e G

roup

’s b

alan

ce o

f cre

dit a

nd o

verd

raft

faci

litie

s no

t with

draw

n am

ount

ed

to E

UR 1

80,4

12 th

ousa

nd (3

1 D

ecem

ber 2

015:

EUR

135

,955

thou

sand

).

As a

t 31

Dec

embe

r 20

16, t

he C

ompa

ny’s

bal

ance

of c

redi

t an

d ov

erdr

aft

faci

lities

not

with

draw

n am

ount

ed to

EUR

71,

052

thou

sand

.

In 2

016

the

Com

pany

and

the

Gro

up e

nter

ed in

to c

redi

t agr

eem

ent w

ith E

urop

ean

inve

stm

ent b

ank

(Not

e 36

) and

ent

ered

into

equ

ity o

blig

atio

ns. T

he C

ompa

ny is

com

mitt

ed to

: a)

Th

e St

ate

of L

ithua

nia,

dire

ctly

or in

dire

ctly,

will

reta

in c

ontro

l ove

r the

Com

pany

; b)

th

e C

ompa

ny's

finan

cial

com

mitm

ents

that

are

not

sec

ured

with

col

late

ral (

a pl

edge

or g

uara

ntee

) wi

ll no

t exc

eed

EUR

300

,000

thou

sand

Th

e G

roup

is c

omm

itted

to:

a)

Gro

up n

et d

ebt-t

o-eq

uity

ratio

will

not e

xcee

d on

e;

b)

Net

deb

t and

EBI

TDA

ratio

will

not e

xcee

d fo

ur;

c)

the

Gro

up's

bbor

row

ing’

s an

d Pr

oper

ty, p

lant

and

equ

ipm

ent r

atio

will

not e

xcee

d th

e ra

te o

f 0.4

0.

F-68

245496 Olive pp138-imp 27/06/2017 09:22 Page 68

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

161

AN

NU

AL R

EPO

RT 2

016

|

20 D

efer

red

inco

me

tax

Def

erre

d in

com

e ta

x as

sets

and

liab

ilitie

s ar

e of

fset

whe

n th

ere

is a

lega

lly e

nfor

ceab

le ri

ght t

o of

fset

cur

rent

tax

asse

ts a

gain

st c

urre

nt ta

x lia

bilit

ies

and

when

def

erre

d in

com

e ta

x re

late

s to

the

sam

e fis

cal

auth

ority

. Mov

emen

ts o

n th

e ac

coun

ts o

f def

erre

d in

com

e ta

x as

sets

and

liab

ilitie

s du

ring

the

repo

rting

per

iod

were

as

follo

ws:

Gro

up

A

t 31

Decem

ber

2014

Reco

gn

ised

in

p

rofi

t o

r lo

ss

Reco

gn

ised

in

o

ther

co

mp

reh

en

siv

e

inc

om

e

At

31

Decem

ber

2015

Reco

gn

ised

in

p

rofi

t o

r lo

ss

Reco

gn

ised

in

o

ther

co

mp

reh

en

siv

e i

nco

me

Incre

ase o

n

acq

uis

itio

n o

f su

bsid

iary

At

31

Decem

ber

2016

D

efe

rred

in

co

me t

ax a

ssets

Diff

eren

ce o

n re

cogn

ition

of r

even

ue f

rom

new

cus

tom

er

conn

ectio

n se

rvic

es

349

(183

) -

166

(182

) -

- (1

6)

Def

erre

d in

com

e 6,

143

(1,6

92)

- 4,

451

(2,2

67)

- -

2,18

4 Ac

crue

d ex

pens

es

634

1,34

9 -

1,98

3 (1

,487

) -

- 49

6 Im

pairm

ent o

f ass

ets

5,

460

(203

) -

5,25

7 (1

46)

- -

5,11

1 Ta

x lo

sses

not

utili

sed

4,08

0 1,

130

- 5,

210

3,69

4 -

52

8,95

6 D

iffer

ence

of f

inan

cial a

nd ta

x va

lue

of a

sset

s id

entif

ied

in

busi

ness

com

bina

tion

2,78

5 -

- 2,

785

Oth

er e

xpen

ses

- -

- -

(649

) -

72

(577

) D

efe

rred

in

co

me ta

x assets

b

efo

re w

rite

-do

wn

to

n

et

reali

sab

le v

alu

e

16,6

66

401

- 17,0

67

1,7

48

- 124

18,9

39

Less

: writ

e-do

wn to

net

real

isabl

e va

lue

- (3

,241

) -

(3,2

41)

(5,0

19)

- -

(8,2

60)

Defe

rred

in

co

me t

ax a

ssets

, n

et

16,6

66

(2,8

40)

- 13,8

26

(3,2

71)

- 124

10,6

79

D

efe

rred

in

co

me t

ax

lia

bilit

ies

Valu

atio

n of

PP

&E

(incr

ease

/dec

reas

e in

va

lue)

an

d di

ffere

nces

in d

epre

ciat

ion

rate

s 17,2

41

5,17

8 19

1 22

,610

9,

354

67

49

32,0

80

Tax

relie

f on

acqu

isitio

n of

PP&

E 3,

732

(1,0

23)

- 2,

709

(533

) -

- 2,

176

Incr

ease

in v

alue

of a

sset

s 14

-

(4)

10

(1)

(9)

- -

Accr

ued

expe

nses

(1

) 1

- -

(166

) -

- (1

66)

Diff

eren

ce o

n re

cogn

ition

of r

even

ue f

rom

new

cus

tom

er

conn

ectio

n se

rvic

es

2,82

5 (3

7)

- 2,

788

(39)

-

- 2,

749

Effe

cts

from

reva

luat

ion

of fi

nanc

ial a

sset

s,

689

- -

689

Diff

eren

ce o

f fin

ancia

l and

tax

valu

e of

ass

ets

iden

tifie

d in

bu

sine

ss c

ombi

natio

n

(1

71)

- 2,

235

2,06

4 O

ther

6,

088

(219

) -

5,86

9 -

- -

5,86

9 D

efe

rred

in

co

me t

ax lia

bilit

y,

net

29,8

99

3,9

00

187

33,9

86

9,1

33

58

2,2

84

45,4

61

Defe

rred

in

co

me t

ax, n

et

(13,2

33)

(6,7

40)

(187)

(20,1

60)

(12,4

04)

(58)

(2,1

60)

(34,7

82)

Gro

up s

tate

men

t of f

inan

cial

pos

ition

pres

ente

d se

para

tely

def

erre

d ta

x as

sets

(EU

R 5,

699

thou

sand

) an

d de

ferre

d ta

x lia

biliti

es (E

UR

40,4

81 th

ousa

nd) i

f the

y re

late

to d

iffer

ent s

ubsi

diar

ies,

the

net b

alan

ce

of d

efer

red

tax

is lia

bility

of E

UR

34,

782

thou

sand

.

F-69

245496 Olive pp138-imp 27/06/2017 09:22 Page 69

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

162

AN

NU

AL R

EPO

RT 2

016

|

Co

mp

an

y

At

31

Decem

ber

2014

Reco

gn

ised

in

p

rofi

t o

r lo

ss

Reco

gn

ised

in

o

ther

co

mp

reh

en

siv

e

inc

om

e

At

31

Decem

ber

2015

Reco

gn

ised

in

p

rofi

t o

r lo

ss

Reco

gn

ised

in

o

ther

co

mp

reh

en

siv

e

inc

om

e

At

31

Decem

ber

2016

Defe

rred

in

co

me t

ax a

ssets

Accr

ued

expe

nses

45

14

-

59

34

- 93

D

efe

rred

in

co

me t

ax a

ssets

, n

et

45

14

- 59

34

- 93

Defe

rred

in

co

me t

ax

lia

bilit

ies

Valu

atio

n re

sult

of fi

nanc

ial a

sset

s 13

- (4

) 9

- (9

) -

Defe

rred

in

co

me t

ax lia

bilit

y,

net

13

- (4

) 9

- (9

) -

Defe

rred

in

co

me t

ax, n

et

32

14

4

50

34

9

93

As a

t 31

Dec

embe

r 201

6, th

e G

roup

did

not

reco

gnise

def

erre

d in

com

e ta

x on

acc

umul

ated

tax

loss

from

ope

ratio

ns o

f EUR

55,

067

thou

sand

(31

Dec

embe

r 201

5: E

UR

21,

607

thou

sand

).

21 G

rant

s an

d su

bsid

ies

The

bala

nce

of g

rant

s co

mpr

ises

gran

ts to

fina

nce

acqu

isitio

n of

ass

ets,

fund

s re

ceive

d fro

m th

e In

tern

atio

nal F

und

for S

uppo

rt of

Dec

omm

issio

ning

of I

gnal

ina

Nuc

lear

Pow

er P

lant

, fro

m th

e EU

stru

ctur

al

fund

s, a

nd p

rope

rty, p

lant

and

equ

ipm

ent a

nd in

tang

ible

ass

ets

rece

ived

in re

turn

for n

o co

nsid

erat

ion

from

the

Gov

ernm

ent o

f the

Rep

ublic

of L

ithua

nia.

Mov

emen

ts o

n th

e ac

coun

t of g

rant

s in

201

6 an

d 20

15

were

as

follo

ws:

Gro

up

As

se

t-re

late

d g

ran

ts

G

ran

ts f

or

em

issio

n

all

ow

an

ces

T

ota

l O

ther

pro

jects

of

the

Gro

up

Pro

jects

fo

r re

no

vati

on

, im

pro

vem

en

t o

f en

vir

on

men

tal an

d

secu

rity

sta

nd

ard

s

Bala

nce a

t 31 D

ecem

ber

2014

35,3

86

269,0

63

-

304,4

49

Dep

reci

atio

n of

pro

perty

, pla

nt a

nd e

quip

men

t (1

,539

)

(10,

663)

-

(12,

202)

G

rant

s re

ceive

d 10

,656

-

2,13

9

12,7

95

Emiss

ion

allo

wanc

es u

tilise

d -

-

(2

,108

)

(2,1

08)

Gra

nts

reve

rsed

(3

8)

(6

,459

)

-

(6,4

97)

Bala

nce a

t 31 D

ecem

ber

2015

44,4

65

251,9

41

31

296,4

37

Dep

reci

atio

n of

pro

perty

, pla

nt a

nd e

quip

men

t (1

,609

)

(10,

798)

-

(12,

407)

G

rant

s re

ceive

d 4

24

-

1,

733

2,

157

Emiss

ion

allo

wanc

es u

tilise

d -

-

(1

,257

)

(1,2

57)

Gra

nts

reve

rsed

( 1

)

-

-

( 1)

Bala

nce a

t 31 D

ecem

ber

2016

43,2

79

241,1

43

507

284,9

29

Amor

tisat

ion

of g

rant

s is

incl

uded

to p

rofit

and

loss

and

cha

rged

aga

inst

the

depr

ecia

tion

expe

nses

of

the

rela

ted

prop

erty

, pla

nt a

nd e

quip

men

t. G

rant

s re

vers

ed a

re re

porte

d wi

thin

reva

luat

ion/

impa

irmen

t of

ass

ets

and

thes

e ex

pens

es a

re p

rese

nted

net

of g

rant

s re

vers

ed.

As d

escr

ibed

in N

ote

4, th

e G

roup

mad

e a

decis

ion

on d

ism

antli

ng o

f Uni

ts 5

and

6 o

f the

Res

erve

Po

wer P

lant

, the

refo

re a

t 31

Dec

embe

r 201

5 th

e G

roup

reco

gnise

d im

pairm

ent l

oss

of th

e lo

ng te

rm

asse

ts “P

rope

rty, p

lant

and

equ

ipm

ent”

in th

e am

ount

of E

UR

36.

7 m

illio

n, a

nd d

efer

red

inco

me

from

th

e gr

ant r

elat

ed to

the

item

of “

Pro

perty

, pla

nt a

nd e

quip

men

t” w

as re

cogn

ised

in in

com

e in

full

amou

nt

of E

UR

6,4

59 th

ousa

nd. N

et re

sult

of re

cogn

ized

impa

irmen

t and

inco

me

from

reve

rsed

gra

nts

was

incl

uded

to p

rofit

and

loss

.

F-70

245496 Olive pp138-imp 27/06/2017 09:22 Page 70

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

163

AN

NU

AL R

EPO

RT 2

016

|

22 D

efer

red

reve

nue

Gro

up

Co

mp

an

y

2016

2015

2016

2015

At

1 J

an

uary

53,6

02

53,9

73

-

-

Rec

eive

d du

ring

the

perio

d 1,

156

2,

136

-

-

Util

ised

durin

g th

e pe

riod

(2,5

44)

(2

,507

)

-

- A

t 31 D

ecem

ber

52,2

14

53,6

02

-

-

Def

erre

d re

venu

e re

pres

ents

inco

me

from

con

nect

ion

of n

ew c

usto

mer

s to

nat

ural

gas

sys

tem

and

to

the

elec

trici

ty g

rid.

Inco

me

from

con

nect

ion

of n

ew c

usto

mer

s to

nat

ural

gas

sys

tem

is re

cogn

ised

ove

r the

ave

rage

use

ful

life

of re

late

d ite

ms

of p

rope

rty, p

lant

and

equ

ipm

ent.

As fr

om 1

Jul

y 20

09, a

ll in

com

e fro

m c

onne

ctio

n of

new

cus

tom

ers

to th

e el

ectri

city

grid

and

from

re

loca

tion

of e

lect

ricity

net

work

faci

litie

s is

reco

gnise

d in

the

perio

d wh

en th

e wo

rks

are

perfo

rmed

. U

ntil

1 Ju

ly 20

09, d

efer

red

reve

nue

was

reco

gnis

ed o

ver t

he a

vera

ge u

sefu

l life

of r

elat

ed it

ems

of

prop

erty

, pla

nt a

nd e

quip

men

t (se

e N

otes

2.2

1 an

d 4)

. In

com

e fro

m c

onne

ctio

n of

cus

tom

ers

is in

clud

ed to

reve

nue

line

in p

rofit

and

loss

. 23

Pro

visio

ns

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Non

-cur

rent

3,

254

5,

084

-

-

Cur

rent

12

,883

23,3

33

-

-

Carr

yin

g a

mo

un

t 16,1

37

28,4

17

-

-

Gro

up

P

rov

isio

ns f

or

on

ero

us

co

ntr

acts

Em

issio

n

all

ow

an

ce

liab

ilit

ies*

Pro

vis

ion

s

for

em

plo

ye

e

ben

efi

ts

Oth

er

pro

vi-

sio

ns

To

tal

At

31 D

ecem

ber

2014

8,1

05

2,8

39

3,3

97

86

14,4

27

Incr

ease

dur

ing

the

perio

d 13

,263

3,

888

807

38

17,9

96

Util

ised

durin

g th

e pe

riod

(Not

e 5)

-

(2,9

92)

(1,0

94)

30

(4,0

56)

Dec

reas

e/in

crea

se o

n ch

ange

of a

ssum

ptio

ns

- -

79

(29)

50

A

t 31 D

ecem

ber

2015

21,3

68

3,7

35

3,1

89

125

28,4

17

Incr

ease

dur

ing

the

perio

d 8,

100

580

839

- 9,

519

Util

ised

durin

g th

e pe

riod

(Not

e 5)

(1

9,17

6)

(2,9

99)

(32)

-

(22,

207)

D

ecre

ase/

incr

ease

on

chan

ge o

f ass

umpt

ions

-

- 53

3 (1

25)

408

At

31 D

ecem

ber

2016

10,2

92

1,3

16

4,5

29

- 16,1

37

Prov

isio

ns f

or e

mpl

oyee

ben

efits

inc

lude

a s

tatu

tory

ret

irem

ent

bene

fit p

ayab

le t

o th

e G

roup

’s

empl

oyee

s. T

he b

alan

ce o

f pro

visio

ns a

t the

rep

ortin

g da

te is

rev

iewe

d wi

th r

efer

ence

to a

ctua

rial

calc

ulat

ions

to e

nsur

e th

at e

stim

atio

n of

retir

emen

t ben

efit

liabi

lities

is a

s m

uch

accu

rate

as

poss

ible

. Th

e lia

bilit

ies

are

reco

gnis

ed a

t dis

coun

ted

valu

e us

ing

the

mar

ket i

nter

est r

ate.

Prov

isio

ns fo

r one

rous

con

tract

s in

clud

e pr

ovis

ions

for g

as s

uppl

y co

ntra

cts

unde

r whi

ch th

e ga

s sa

le

pric

e wi

ll be

lowe

r com

pare

d to

gas

acq

uisi

tion

cost

. At t

he e

nd o

f 201

6, th

ese

prov

isio

ns a

mou

nted

to

EUR

10,

262

thou

sand

(20

15:

EUR

21,

368

thou

sand

). U

pon

acqu

isitio

n of

nat

ural

gas

sup

ply

oper

atio

ns, t

he G

roup

com

pany

Lie

tuvo

s D

ujų

Tiek

imas

UA

B a

ssum

ed a

n ob

ligat

ion

to tr

ansf

er t

he

disc

ount

, whi

ch w

as re

ceive

d re

trosp

ectiv

ely

on n

atur

al g

as im

port

pric

e du

ring

Janu

ary

2013

–Apr

il 20

14, t

o th

e en

d us

ers

in fu

ture

per

iods

. As

at 3

1 De

cem

ber 2

016

and

2015

, the

Gro

up h

as c

alcu

late

d th

e pr

ovis

ion

in re

spec

t of o

nero

us p

art o

f con

tract

s fo

r hou

seho

ld a

nd n

on-h

ouse

hold

use

rs, b

y ta

king

in

to a

ccou

nt th

e pr

ereq

uisi

tes

for t

he e

xecu

tion

of th

e co

ntra

cts

at th

e fin

anci

al re

porti

ng d

ate.

Key

as

sum

ptio

ns u

sed

in e

stim

atin

g pr

ovis

ions

for o

nero

us c

ontra

cts

were

as

follo

ws:

� Pr

ovis

ions

for

one

rous

con

tract

s wi

th h

ouse

hold

use

rs w

ere

acco

unte

d fo

r wi

th r

efer

ence

to

fore

cast

sal

es v

olum

es a

nd p

rices

agr

eed

with

the

NC

C fo

r the

firs

t hal

f of 2

017;

�

Prov

isio

ns fo

r one

rous

con

tract

s wi

th n

on-h

ouse

hold

use

rs w

ere

acco

unte

d fo

r with

refe

renc

e to

fo

reca

st s

ales

vol

umes

und

er th

e co

ntra

cts

sign

ed w

ith in

divid

ual n

on-h

ouse

hold

use

rs a

t the

end

of

201

6. N

o di

scou

nt ra

te is

use

d in

est

imat

ing

the

prov

isio

ns fo

r non

-hou

seho

ld u

sers

due

to a

re

lativ

ely

shor

t per

iod

of re

aliz

atio

n of

pro

visio

ns.

F-71

245496 Olive pp138-imp 27/06/2017 09:22 Page 71

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

164

AN

NU

AL R

EPO

RT 2

016

|

24 O

ther

non

-cur

rent

am

ount

s pa

yabl

e an

d lia

biliti

es

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

PSO

se

rvic

es

fees

re

ceive

d in

ad

vanc

e 9,

219

7,

018

-

-

Non

-cur

rent

trad

e pa

yabl

es

813

1,52

9

-

- N

on-c

urre

nt a

mou

nts

paya

ble

for t

he a

cqui

red

shar

es o

f sub

sidi

arie

s

-

61

9,

272

17

,819

D

eriv

ative

fina

ncia

l ins

trum

ents

(Not

e 26

) 8

51

-

-

-

Oth

er

897

425

8

6

54

Carr

yin

g a

mo

un

t 11,7

80

9,0

33

9,3

58

17,8

73

The

curre

nt p

ortio

n of

PSO

ser

vice

fees

rec

eive

d in

adv

ance

was

cla

ssifie

d as

adv

ance

am

ount

s re

ceive

d (E

UR

177

thou

sand

as

at 3

1 D

ecem

ber 2

016

and

EUR

14,

633

thou

sand

as

at 3

1 D

ecem

ber

2015

).

As o

f 31

Dec

embe

r 201

6 th

e C

ompa

ny h

as a

ccou

nted

for r

ever

sal o

f con

tinge

nt c

onsid

erat

ion

paya

ble

for

acqu

isitio

n of

NT

Vald

os, U

AB in

am

ount

EU

R 9

,036

thou

sand

(N

ote

31),

as in

the

opin

ion

of

man

agem

ent

ther

e is

indi

catio

n, t

hat

max

imum

fin

anci

al r

esul

ts,

set

in t

he a

gree

men

t wi

ll no

t be

ac

hiev

ed. T

he c

ontin

gent

con

side

ratio

n is

base

d on

nor

mal

ized

EBI

TDA

for 2

018,

whi

le fo

reca

stin

g its

le

vel t

he C

ompa

ny c

onsi

dere

d ac

tual

res

ults

of

NT

Vald

os,

UAB

in 2

016,

fore

cast

s fo

r 20

17 a

nd

proj

ecte

d gr

owth

of L

ithua

nian

GDP

.

25 T

rade

pay

able

s

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Amou

nts

paya

ble

for

elec

tricit

y an

d he

avy

fuel

oil

48,6

00

43,3

53

-

-

Amou

nts

paya

ble

for

cons

truct

ion

work

s, s

ervi

ces

10,1

13

11

,874

-

- Am

ount

s pa

yabl

e fo

r gas

28

,046

30,8

17

-

-

Oth

er a

mou

nts

paya

ble

9,35

9

6,07

5

343

44

3 C

arr

yin

g a

mo

un

t 96,1

18

92,1

19

343

443

26 O

ther

cur

rent

am

ount

s pa

yabl

e an

d lia

bilit

ies

Gro

up

Co

mp

an

y

2016

2015

2016

2015

Empl

oym

ent-r

elat

ed li

abilit

ies

6,56

1

7,61

5

612

-

Accr

ued

expe

nses

and

def

erre

d re

venu

e fo

r el

ectri

city

and

gas

1,

666

47

0

-

- Am

ount

s pa

yabl

e fo

r pro

perty

, pla

nt a

nd

equi

pmen

t 34

,149

31,9

94

45

- Ta

xes

(oth

er th

an in

com

e ta

x)

9,22

4

14,0

66

11

- Ac

crue

d ex

pens

es a

nd d

efer

red

reve

nue

16,2

83

9,

405

-

-

Der

ivat

ive

finan

cial

inst

rum

ents

2,

907

-

-

Cur

rent

am

ount

s pa

yabl

e fo

r acq

uire

d sh

ares

of s

ubsid

iarie

s

-

12

6

-

45,5

52

Put o

ptio

n re

dem

ptio

n lia

bilit

y 4,

481

-

-

-

Oth

er a

mou

nts

paya

ble

and

liabi

litie

s 4,

293

3,

425

49

361

Carr

yin

g a

mo

un

t 79,5

64

67,1

01

717

45,9

13

Deriv

ative

fina

ncia

l inst

rum

ents

The

Gro

up‘s

and

the

Com

pany

‘s a

sset

s an

d lia

bilit

ies,

rela

ted

to d

eriv

ative

fina

ncia

l ins

trum

ents

are

:

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Oth

er

cu

rren

t assets

Deriv

ative

fina

ncia

l ins

trum

ents

link

ed to

the

mar

ket p

rice

of e

lect

ricity

4,

593

-

-

-

Deriv

ative

fina

ncia

l ins

trum

ent l

inke

d to

the

mar

ket p

rice

of g

as

13

To

tal

4,6

06

-

-

-

-

-

-

Oth

er

no

n-c

urr

en

t am

ou

nts

paya

ble

an

d

liab

ilit

ies

In

tere

st ra

te s

waps

(Not

e 24

) 85

1

-

15

-

Oth

er

cu

rren

t am

ou

nts

p

ayab

le

an

d

liab

ilit

ies

In

tere

st ra

te s

waps

49

3

-

- De

rivat

ive fi

nanc

ial i

nstru

men

ts li

nked

to th

e m

arke

t pric

e of

ele

ctric

ity

2,41

4

-

-

- T

ota

l 3,7

58

-

15

-

F-72

245496 Olive pp138-imp 27/06/2017 09:22 Page 72

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

165

AN

NU

AL R

EPO

RT 2

016

|

Prof

it (lo

ss)

rela

ted

to s

ales

and

rev

alua

tion

of d

eriva

tive

finan

cial

inst

rum

ents

are

sum

mar

ized

as

follo

ws:

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Prof

it ea

rned

on

sale

of d

eriva

tive

finan

cial

in

stru

men

ts

2,68

6

-

-

- Lo

ss in

curre

d on

sal

e of

der

ivativ

e fin

anci

al

inst

rum

ents

(1

,797

)

-

-

- R

ealized

p

rofi

t (l

oss)

on

sale

s

of

deri

vati

ve f

inan

cia

l in

str

um

en

ts

889

-

-

-

Reva

luat

ion

of

deriv

ative

fin

anci

al

inst

rum

ents

2,

036

-

(1

5)

-

pro

fit

(lo

ss)

on

re

valu

atio

n o

f d

eri

vati

ve

fin

an

cia

l in

str

um

en

ts

2,0

36

-

(1

5)

-

Net

resu

lt

2,9

25

-

(1

5)

-

At 1

Jan

uary

201

6 Th

e C

ompa

ny's

subs

idia

ry E

nerg

ijos

tiekim

as U

AB jo

ined

the

elec

tricit

y de

rivat

ives

exch

ange

NAS

DAQ

Com

mod

ities.

Ene

rgijo

s tie

kimas

UAB

is c

urre

ntly

the

only

Lith

uani

an e

lect

ricity

pr

ovid

er,

activ

e in

the

sto

ck m

arke

t. Tr

adin

g of

der

ivativ

e pr

oduc

ts c

an r

educ

e el

ectri

city

pric

e flu

ctua

tion

risks

, as

well

as to

car

ry o

ut c

omm

erci

al a

ctiv

ities,

mak

ing

use

of fl

uctu

atio

ns in

mar

ket

pric

es. E

nerg

ijos

tiekim

as U

AB p

erfo

rms

the

mar

ket m

aker

func

tions

in re

spec

t of f

inan

cial

inst

rum

ents

lin

ked

to L

atvia

n el

ectri

city

mar

ket p

rices

(EPA

D Ri

ga).

Deriv

ative

fina

ncia

l inst

rum

ents

fair

valu

e de

term

inat

ion

The

Gro

up a

nd t

he C

ompa

ny a

ccou

nts

for

deriv

ativ

e fin

anci

al i

nstru

men

ts a

t fa

ir va

lue.

At

31

Dec

embe

r 201

6. T

he G

roup

acc

ount

ed fo

r EUR

4,6

06 th

ousa

nd o

f der

ivativ

es a

sset

s an

d EU

R 3,

758

thou

sand

. of d

eriva

tive

liabi

litie

s. D

eriva

tive

asse

ts a

nd lia

biliti

es b

reak

down

of t

he fa

ir va

lue

hier

arch

y le

vels

as

at 3

1 D

ecem

ber 2

016

are:

Gro

up

1 l

evel

2 l

evel

3 l

evel

To

tal

Pri

ces q

uo

ted

in

acti

ve

mark

ets

Inp

uts

o

bserv

ab

le

eit

her

dir

ectl

y

or

ind

irectl

y,

Un

ob

serv

ab

le

inp

uts

As

se

ts:

Deriv

ative

fina

ncia

l inst

rum

ents

lin

ked

to th

e m

arke

t pric

e of

el

ectri

city

3,

822

771

- 4,

593

Deriv

ative

fina

ncia

l inst

rum

ent

linke

d to

the

mar

ket p

rice

of g

as

- 13

-

13

L

iab

ilit

ies:

Deriv

ative

fina

ncia

l inst

rum

ents

lin

ked

to th

e m

arke

t pric

e of

el

ectri

city

(1

,142

) (1

,272

) -

(2,4

14)

Inte

rest

rate

swa

ps

- (1

,344

) -

(1,3

44)

2,6

80

(1,8

32)

- 848

Gro

up a

ttrib

utes

to 1

fair

valu

e hi

erar

chy

leve

l tho

se d

eriva

tive

finan

cial in

stru

men

ts th

at a

re p

urch

ased

in

the

Nas

daq

Com

mod

ities

Exch

ange

and

are

link

ed to

the

mar

ket p

rice

of e

lect

ricity

. Val

ue o

f the

se

deriv

ative

fina

ncia

l ins

trum

ents

is a

sses

sed

acco

rdin

g to

pric

es p

ublis

hed

by N

asda

q C

omm

oditi

es

Exch

ange

. G

roup

attr

ibut

es to

2 fa

ir va

lue

hier

arch

y le

vel t

hose

der

ivativ

e fin

anci

al in

stru

men

ts li

nked

to L

ithua

nia

– La

tvia

and

Est

onia

– F

inla

nd tr

ade

area

pric

es. D

eriv

ativ

e fin

anci

al in

stru

men

ts p

urch

ased

dire

ctly

from

oth

er m

arke

t pa

rticip

ants

(O

ver-t

he-c

ount

er c

ontra

cts)

and

acq

uire

d Ph

ysica

l Tr

ansm

issi

on

Rig

hts

are

eval

uate

d on

the

basis

of t

he N

asda

q st

ock

exch

ange

Com

mod

ities

price

s ad

just

ing

with

im

pact

of t

rade

are

as p

oten

tial r

isks

dete

rmin

ed b

y ex

perts

. Th

e in

tere

st s

wap

fair

valu

e is

det

erm

ined

usi

ng th

e di

scou

nted

cas

h flo

w m

etho

d an

d co

rresp

onds

to

2 le

vel o

f the

fair

valu

e hi

erar

chy.

F-73

245496 Olive pp138-imp 27/06/2017 09:22 Page 73

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

166

AN

NU

AL R

EPO

RT 2

016

|

27 S

ales

reve

nue

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Rev

enue

from

sal

e of

ele

ctric

ity

773,

344

71

9,52

3

-

- R

even

ue fr

om s

ale

of g

as

282,

040

31

4,68

5

-

- O

ther

sal

es re

venu

e 15

,158

13,8

13

1,

802

1,

992

To

tal

1,0

70,5

42

1,0

48,0

21

1,8

02

1,9

92

28 O

ther

reve

nue

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Rep

air s

ervic

es

8,96

0

25,1

28

-

-

IT a

nd c

omm

unica

tion

serv

ices

5,

090

5,

476

-

-

Leas

e in

com

e 7,

242

6,

254

-

-

Fina

ncia

l leas

e in

tere

st re

venu

e (N

ote

14)

402

11

4

O

ther

9,

394

10

,773

2

2 T

ota

l 31,0

88

47,7

45

2

2

The

Gro

up c

ompa

nies

pro

vide

repa

ir se

rvic

es t

hat

com

prise

mai

nten

ance

, op

erat

ion,

rep

air

and

cons

truct

ion

of e

lect

ricity

vol

tage

tran

smiss

ion

and

dist

ribut

ion

netw

ork

elec

tricit

y eq

uipm

ent.

Th

e G

roup

pro

vides

mot

or v

ehicl

e an

d re

al e

stat

e op

erat

ing

leas

es u

nder

con

tract

s co

nclu

ded

for

defin

ite p

erio

d, w

hich

may

be

exte

nded

for a

dditi

onal

per

iod

rang

ing

from

sev

eral

hou

rs to

sev

eral

ye

ars.

Inc

ome

from

leas

e of

mot

or v

ehic

les

and

real

est

ate

is re

cogn

ised

as

inco

me

in p

rofit

or l

oss

on a

pro

porti

onat

e ba

sis

over

the

leas

e pe

riod.

29 P

urch

ase

of e

lect

ricity

, gas

for t

rade

and

rela

ted

serv

ices

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Cos

ts o

f pur

chas

es o

f gas

for t

rade

23

6,15

9

34

5,50

4

-

- Pu

rcha

ses

of

elec

tricit

y an

d re

late

d se

rvic

es

446,

887

39

6,15

6

-

- Pu

rcha

ses

of s

ubco

ntra

ct s

ervic

es

8,69

2

19,8

30

To

tal

691,7

38

761,4

90

-

-

30 O

ther

exp

ense

s

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Taxe

s

6,68

4

6,52

8

53

45

Te

leco

mm

unica

tions

and

IT s

ervic

es

3,62

2

3,72

5

232

22

2 C

usto

mer

ser

vice

3,39

9

2,74

5

-

- W

rite-

offs

of P

P&E

(Not

es 5

,6)

3,39

3

2,79

0

-

- Ex

pens

es o

n re

valu

atio

n an

d pr

ovis

ions

fo

r em

issio

n al

lowa

nces

3,

278

(3

82)

-

-

Util

ity s

ervic

es

2,31

0

1,66

7

71

55

Le

ase

2,10

7

2,35

1

180

15

9 W

rite-

down

allo

wanc

e fo

r inv

ento

ries

(reve

rsal

) (N

ote

11)

275

(1

,077

)

-

- Ex

pens

es (i

ncom

e) o

n im

pairm

ent o

f oth

er

non-

curre

nt a

sset

s (N

ote

10)

(1,1

31)

(3

29)

-

-

Impa

irmen

t allo

wanc

e fo

r am

ount

s re

ceiva

ble

(reve

rsal

) (N

otes

9,1

2,13

) 2,

189

(1

,807

)

4,18

1

- Im

pairm

ent o

f goo

dwill

(Not

e 33

) 29

6

O

ther

exp

ense

s 12

,852

13,9

13

1,

256

1,

290

Carr

yin

g a

mo

un

t 39,2

74

30,1

24

5,9

73

1,7

71

31 F

inan

ce in

com

e

Gro

up

Co

mp

an

y

2016

2015

2016

2015

Inte

rest

inco

me

2,85

8

4,95

7

3,87

1

6,06

0 La

te p

aym

ent i

nter

est i

ncom

e 47

0

-

-

- De

rivat

ive fi

nanc

ial in

stru

men

ts re

valu

atio

n re

sult

(Not

e 26

) 13

6

-

-

- O

ther

fina

nce

inco

me

(Not

e 24

) 25

6

675

9,

655

-

To

tal

3,7

20

5,6

32

13,5

26

6,0

60

The

Com

pany

's in

tere

st in

com

e m

ostly

rela

tes

to a

loan

gra

nted

to E

PSO

-G U

AB.

As d

isclo

sed

in N

ote

4:

a)

Afte

r th

e ye

ar-e

nd a

djus

tmen

t of

the

est

imat

e of

the

Con

tinge

nt c

onsi

dera

tion

rela

ted

to t

he

acqu

isitio

n of

sha

res

of s

ubsi

diar

y N

T Va

ldos

UAB

, the

Com

pany

reco

gnis

ed r

even

ue o

f EU

R

9,03

6 in

oth

er fi

nanc

ing

activ

ities

; b)

Im

plem

enta

tion

of t

he B

iofu

el B

oile

r H

ouse

Pro

ject

res

ulte

d wi

th in

curre

d lo

ss t

hat

trigg

ered

re

nego

tiatio

n of

pric

e th

e C

ompa

ny p

aid

for U

AB „K

auno

ene

rget

ikos

rem

onta

s“ s

hare

s re

sults

of

whic

h en

able

d th

e C

ompa

ny r

ecog

nise

d EU

R 6

19 t

hous

and

of O

ther

fin

ance

inc

ome

and

corre

spon

ding

rec

eiva

ble

from

sel

ler (

Not

es 4

,13)

.

F-74

245496 Olive pp138-imp 27/06/2017 09:22 Page 74

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

167

AN

NU

AL R

EPO

RT 2

016

|

32 F

inan

ce c

osts

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Inte

rest

exp

ense

s 5,

760

4,

456

73

2

419

Shar

e ca

pita

l con

vers

ion

expe

nses

-

1,

588

-

1,

588

Deriv

ative

fin

anci

al

inst

rum

ents

re

valu

atio

n re

sult

(Not

e 26

) 3

70

-

-

-

Oth

er fi

nanc

e co

sts

726

50

5

500

31

4 T

ota

l 6,8

56

6,5

49

1,2

32

2,3

21

33 B

usin

ess

com

bina

tions

O

ne o

f the

Gro

up d

evel

opm

ent a

reas

is c

onsi

dere

d to

be

inve

stm

ents

in re

newa

ble

ener

gy, t

here

fore

in

201

6 th

e G

roup

has

acq

uire

d tw

o wi

nd p

arks

. O

n 18

Jan

uary

201

6, th

e C

ompa

ny a

cqui

red

209,

662

ordi

nary

regi

ster

ed s

hare

s of

EU

RAK

RAS

UAB

repr

esen

ting

75%

of t

he s

hare

cap

ital o

f EU

RAK

RAS

UAB

and

75%

of v

otin

g rig

hts

durin

g th

e G

ener

al

Mee

ting

of S

hare

hold

ers.

The

cos

t of

acq

uisit

ion

of s

hare

s am

ount

ed t

o EU

R 17

,058

tho

usan

d.

EUR

AKRA

S UA

B, a

Lith

uani

an c

ompa

ny a

cqui

red,

ope

rate

s a

park

of 8

win

d tu

rbin

es w

ith th

e ov

eral

l ca

paci

ty o

f 24

MW

, loc

ated

in G

eiši

ai a

nd R

otul

iai I

I villa

ges,

Jur

bark

as d

istric

t. O

n 20

Jan

uary

201

6, th

e C

ompa

ny a

cqui

red

100%

of o

rdin

ary

regi

ster

ed s

hare

s of

Est

onia

n co

mpa

ny

HO

B O

U a

nd 4

3.28

% o

f ord

inar

y re

gist

ered

sha

res

of E

ston

ian

com

pany

Tuu

leen

ergi

a O

U fo

r the

tota

l am

ount

of E

UR 1

1,35

0 th

ousa

nd (i

nclu

ding

rede

emed

cur

rent

bor

rowi

ngs

of E

UR 4

,691

thou

sand

from

sh

areh

olde

rs).

HO

B O

U ow

ns 5

6.72

% o

f sh

ares

of

Tuul

eene

rgia

OU

, th

eref

ore,

fol

lowi

ng t

his

trans

actio

n th

e C

ompa

ny h

olds

100

% o

f sha

res

of T

uule

ener

gia

OU

. Tuu

leen

ergi

a O

U o

pera

tes

a pa

rk

of 6

win

d tu

rbin

es w

ith th

e ov

eral

l cap

acity

of 1

8.3

MW

, loc

ated

in M

ali a

nd T

amba

, Est

onia

. In

tang

ible

ass

ets

have

bee

n id

entif

ied

in th

e ac

quire

d EU

RAK

RAS

UAB

, nam

ely

tie ri

ght t

o pr

oduc

e el

ectri

city

at a

hig

her t

ariff

, whi

ch u

nder

the

Gro

up a

sses

smen

t am

ount

to E

UR

14,

900

thou

sand

.

F-75

245496 Olive pp138-imp 27/06/2017 09:22 Page 75

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

168

AN

NU

AL R

EPO

RT 2

016

|

The

Gro

up h

ad 1

2 m

onth

s fro

m th

e da

te o

f the

acq

uisit

ion

of th

e bu

sines

ses

of E

URAK

RAS

UAB

, HO

B O

U a

nd T

uule

ener

gia

OU,

dur

ing

whic

h it

had

to re

view

and

dete

rmin

e fa

ir va

lues

of a

sset

s an

d lia

bilit

ies.

O

n bu

sine

ss c

ombi

natio

n, a

sset

s an

d lia

bilit

ies

of E

UR

AKRA

S UA

B, H

OB

OU

and

Tuu

leen

ergi

a O

U w

ere

iden

tifie

d wi

th th

e fo

llowi

ng fa

ir va

lues

at t

he d

ate

of a

cqui

sitio

n .

EU

RA

KR

AS

UA

B

H

OB

OU

an

d

Tu

ule

en

erg

ia O

U

T

ota

l

Inta

ngib

le a

sset

s 14

,900

-

14,9

00

Prop

erty

, pla

nt, a

nd e

quip

men

t 32

,363

30,6

36

62

,999

O

ther

non

-cur

rent

am

ount

s re

ceiva

ble

-

605

60

5 De

ferre

d ta

x as

sets

75

-

75

Inve

ntor

ies

and

prep

aym

ents

13

-

13

Amou

nts

rece

ivabl

e wi

thin

one

yea

r 32

0

499

81

9 C

ash

and

cash

equ

ivale

nts

580

15

4

734

Non

-cur

rent

liab

ilitie

s (2

4,00

1)

(1

8,58

6)

(4

2,58

7)

Def

erre

d in

com

e ta

x lia

bilit

y (2

,235

)

-

(2,2

35)

Cur

rent

liab

ilitie

s (1

,219

)

(6,9

45)

(8

,164

)

Ne

t ass

ets

20,7

96

6,

363

27

,159

N

on-c

ontro

lling

inte

rest

5,

199

-

5,

199

Goo

dwill

aris

ing

on b

usin

ess

com

bina

tion

1,46

1

296

1,

757

Writ

e-of

f of g

oodw

ill -

(2

96)

(2

96)

Purc

hase

con

side

ratio

n pa

id

17,0

58

6,

659

23

,717

N

et

cash

ou

tflo

w o

n a

cq

uis

itio

n o

f su

bsid

iari

es:

C

ash

paid

for s

hare

s to

sel

ling

shar

ehol

ders

(1

7,05

8)

(6

,659

)

(23,

717)

Re

paym

ent o

f com

pany

loan

s to

sha

reho

lder

s -

(4

,691

)

(4,6

91)

Cas

h an

d ca

sh e

quiva

lent

s at

acq

uire

d co

mpa

nies

58

0

154

73

4 N

et

cash

flo

w

(16,4

78)

(1

1,1

96)

(2

7,6

74)

The

valu

e of

non

-con

trollin

g in

tere

st (2

5 pe

r cen

t of

UAB

EU

RAK

RAS

shar

es) w

as d

eter

min

ed a

s pr

opor

tiona

te s

hare

in th

e fa

ir va

lue

of n

et a

sset

s ac

quire

d.

The

grou

p ac

coun

ted

for n

et re

sult (

prof

it) fo

r UAB

Eur

akra

s an

d Tu

ulee

nerg

ia O

U a

mou

ntin

g to

EU

R 4

93 th

ousa

nd a

nd E

UR

801

thou

sand

app

ropr

iate

ly in

its

cons

olid

ated

sta

tem

ent o

f com

preh

ensi

ve in

com

e fo

r 201

6. R

even

ue o

f Eur

akra

s an

d Tu

ulee

nerg

ia O

U in

the

cons

olid

ated

sta

tem

ent o

f com

preh

ensiv

e in

com

e am

ount

ed to

EU

R 4

,984

thou

sand

and

EU

R 3

,319

thou

sand

EU

R a

ppro

pria

tely

. O

n 22

Jul

y 20

16 s

ubsi

diar

ies

HO

B O

U a

nd T

uule

ener

gia

OU

were

reor

gani

sed

by w

ay o

f mer

ger.

HO

B O

U w

as m

erge

d wi

th T

uule

ener

gia

OU

and

cea

sed

its a

ctivi

ties

as a

lega

l ent

ity.

F-76

245496 Olive pp138-imp 27/06/2017 09:22 Page 76

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

169

AN

NU

AL R

EPO

RT 2

016

|

34 In

com

e ta

x ex

pens

es

Inco

me

tax

expe

nses

for t

he p

erio

d co

mpr

ise y

ear p

erio

d in

com

e ta

x an

d de

ferre

d in

com

e ta

x.

Prof

it fo

r 201

6 wa

s su

bjec

t to

inco

me

tax

at a

rate

of 1

5% (s

imila

rly a

s in

201

5) in

acc

orda

nce

with

the

Lith

uani

an re

gula

tory

legi

slat

ion

on ta

xatio

n.

G

rou

p

C

om

pa

ny

2016

2015

2016

2015

Cur

rent

yea

r inc

ome

tax

expe

nses

13

,373

2,14

0

23

26

2 D

efer

red

inco

me

tax

expe

nses

(ben

efit)

12

,404

6,74

0

(34)

(14)

In

co

me t

ax e

xp

en

ses (

ben

efi

t) r

eco

gn

ised

in

pro

fit

or

loss

25,7

77

8,8

80

(1

1)

248

Inco

me

tax

on th

e G

roup

’s a

nd th

e C

ompa

ny’s

pro

fit b

efor

e ta

x di

ffers

from

the

theo

retic

al a

mou

nt th

at

woul

d ar

ise

usin

g th

e ta

x ra

te a

pplic

able

to p

rofit

of t

he C

ompa

ny:

Gro

up

Co

mp

an

y

2016

2015

2016

2015

Prof

it (lo

ss) b

efor

e ta

x 14

8,11

3

64,1

76

99

,326

111,

265

Inco

me

tax

expe

nses

(ben

efit)

at

tax

rate

of 1

5%

22,2

17

9,

626

14

,899

16,6

90

Expe

nses

not

ded

uctib

le fo

r tax

pu

rpos

es

7,01

0

6,66

4

1,16

1

3,46

9 In

com

e no

t sub

ject

to ta

x (4

,489

)

(1,8

46)

(1

6,07

1)

(1

9,91

1)

Adju

stm

ent o

f inc

ome

tax

on

disp

osal

of p

art o

f bus

ines

s*

-

(8,5

39)

-

-

Inco

me

tax

relie

f for

the

inve

stm

ent p

roje

ct

(4,0

98)

(8

63)

-

-

Adju

stm

ents

in re

spec

t of p

rior

year

s 48

21

-

-

Tax

loss

es u

tilise

d 70

19

-

-

Ure

cogn

ised

def

erre

d ta

x on

tax

loss

es

5,01

9

3,79

8

-

- In

co

me t

ax e

xp

en

se (

ben

efi

t)

25,7

77

8,8

80

(1

1)

248

*Res

tate

men

t of i

ncom

e ta

x is

rela

ted

to a

cqui

sitio

n of

nat

ural

gas

sup

ply

oper

atio

ns b

y Li

etuv

os D

ujų

Tiek

imas

UAB

from

Lie

tuvo

s D

ujos

AB

in 2

014

(see

Not

e 4

Cha

nge

in tr

eatm

ent o

f tax

goo

dwill)

. Ad

just

men

t of i

ncom

e ta

x on

disp

osal

of p

art o

f bus

ines

sl

Nat

ural

gas

sup

ply

busi

ness

was

tra

nsfe

rred

betw

een

Gro

up s

ubsi

diar

ies

at m

arke

t va

lue

as

dete

rmin

ed b

y in

depe

nden

t va

luer

s -

EUR

17,

510

thou

sand

, wh

erea

s th

e ca

rryin

g am

ount

of

net

asse

ts o

f the

sup

ply

activ

ity w

as e

qual

to E

UR

74,

434

thou

sand

at t

he d

ate

of b

usin

ess

acqu

isitio

n.

The

diffe

renc

e be

twee

n of

EUR

74,

434

thou

sand

was

trea

ted

by th

e ac

quire

r as

a ne

gativ

e go

odwi

ll an

d wa

s ta

xed

with

cur

rent

inco

me

tax

in 2

014.

In 2

015

the

acqu

irer r

ecei

ved

the

bind

ing

decis

ion

of

the

Tax

Auth

oritie

s, w

here

by t

he d

iffer

ence

sho

uld

not

be t

reat

ed a

s ne

gativ

e ta

x go

odwi

ll, a

nd

acco

rdin

gly,

no

inco

me

tax

shou

ld b

e as

sess

ed t

here

on.

Sin

ce t

he t

ax e

ffect

s of

the

bus

ines

s ac

quis

ition

trans

actio

n (a

mou

ntin

g to

EUR

8,5

39 th

ousa

nd in

201

4) w

as r

ecog

nise

d by

the

Gro

up

with

in p

rofit

or

loss

in th

e st

atem

ent o

f com

preh

ensi

ve in

com

e, th

e ad

just

ed in

com

e ta

x am

ount

in

2015

(bas

ed o

n th

e bi

ndin

g de

cisi

on o

f the

Tax

Aut

horit

ies)

was

als

o re

cogn

ised

as

adju

stm

ent t

o pr

ofit

or lo

ss.

35 D

ivide

nds

Divi

dend

s de

clar

ed b

y th

e C

ompa

ny in

201

6 an

d 20

15:

Div

ide

nd

s d

ecla

red

by

2016

2015

EU

R

tho

usan

ds

Div

ide

nd

s

per

sh

are

E

UR

th

ou

san

ds

Div

ide

nd

s

per

sh

are

Li

etuv

os e

nerg

ija, U

AB

97,1

94

0.02

33

57

,844

0.

0138

N

umbe

r of s

hare

s 4,

179,

849,

289

4,

179,

849,

289

Divi

dend

s de

clar

ed b

y th

e G

roup

com

pani

es in

201

6:

Div

ide

nd

s d

ecla

red

by

Div

iden

ds r

eceiv

ed

by

Lie

tuvo

s

En

erg

ija

U

AB

Gro

up

N

on

-co

ntr

ollin

g

inte

rest

T

ota

l

Liet

uvos

Ene

rgijo

s G

amyb

a AB

26

,422

887

27

,309

En

ergi

jos

Skirs

tym

o O

pera

toriu

s AB

40

,957

2,16

4

43,1

21

NT

Vald

os U

AB

1,25

0

-

1,25

0 LI

TGAS

UAB

79

6

398

1,

194

Tech

nolo

gijų

ir In

ovac

ijų C

entra

s U

AB

196

4

20

0 T

ota

l 69,6

21

3,4

53

73,0

74

Divi

dend

s de

clar

ed b

y th

e G

roup

com

pani

es in

201

5:

Div

ide

nd

s d

ecla

red

by

Div

iden

ds r

eceiv

ed

by

Lie

tuvo

s

En

erg

ija

UA

B

Gro

up

N

on

-c

on

tro

llin

g

inte

rest

T

ota

l

Liet

uvos

Ene

rgijo

s G

amyb

a AB

23

,444

943

24

,387

LE

STO

AB

31,9

24

1,

898

33

,822

Li

etuv

os D

ujos

AB

37,0

54

1,

287

38

,341

En

ergi

jos

Tiek

imas

UAB

1,

155

-

1,

155

Duo

men

ų Lo

gist

ikos

Cen

tras

UA

B

248

63

311

To

tal

93,8

25

4,1

91

98,0

16

F-77

245496 Olive pp138-imp 27/06/2017 09:22 Page 77

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

170

AN

NU

AL R

EPO

RT 2

016

|

Rep

rese

ntat

ion

of c

ompa

rativ

e in

form

atio

n fo

r 201

5 In

201

6 th

e C

ompa

ny h

as c

hang

ed p

rese

ntat

ion

of d

ivide

nd in

com

e in

the

stat

emen

t of c

ompr

ehen

sive

in

com

e an

d ha

s re

clas

sifie

d ac

cord

ingl

y co

mpa

rativ

e in

form

atio

n fo

r 201

5. Im

pact

of r

ecla

ssific

atio

n on

Com

pany

’s s

tate

men

t of c

ompr

ehen

sive

inco

me

in 2

015:

2015

(rep

ort

ed

)

Recla

ssif

icati

on

2015

(recla

ssif

ied

)

R

even

ue

Rev

enue

1,99

2

-

1,99

2 O

ther

reve

nue

2

-

2

Divi

dend

s

-

93,8

25

93

,825

T

ota

l re

ven

ue

1,9

94

93,8

25

95,8

19

T

ota

l o

pera

tin

g e

xp

en

ses

11,7

07

-

11,7

07

Fi

nanc

e in

com

e

99,8

85

(9

3,82

5)

6,

060

Fina

nce

cost

s

(2,3

21)

-

(2

,321

)

Pro

fit

(lo

ss)

befo

re t

ax

111,2

65

-

111,2

65

Inco

me

tax

and

defe

rred

inco

me

tax

expe

nse

(2

48)

-

(2

48)

Net

pro

fit

111,0

17

-

111,0

17

O

ther

co

mp

reh

en

siv

e in

co

me

(2

6)

-

(2

6)

T

ota

l co

mp

reh

en

siv

e i

nco

me f

or

the p

eri

od

110,9

91

-

110,9

91

36 C

ontin

gent

liab

ilitie

s an

d of

f-bal

ance

she

et

com

mitm

ents

G

uara

ntee

s iss

ued

and

rece

ived

by

the

Com

pany

Nam

e o

f su

bsid

iary

N

ote

Is

su

ed

to

Is

su

e d

ate

M

atu

rity

M

ax.

am

ou

nt

of

gu

ara

nte

e

Ex

po

su

re

on

2016.1

2.3

1

Ex

po

su

re

on

2017.1

2.3

1

UAB

„EU

RA

KR

AS“

AB

SEB

ban

k 20

16.0

4.05

-

- 24

,929

- UA

B „E

UR

AK

RAS

“

AB S

EB b

ank

2016

.04.

05

- -

836

- UA

B „E

nerg

ijos

tieki

mas

“

Ee

sti E

nerg

ia

Akts

iase

lts

2016

.08.

25

- 2,

000

--

UAB

Viln

iaus

ko

gene

raci

nė

jėga

inė

a Eu

rope

an

inve

stm

ent b

ank

2016

.12.

05

- -

--

„Lie

tuvo

s en

ergi

ja“,

UA

B G

roup

co

mpa

nies

b

„Lie

tuvo

s en

ergi

ja“,

UA

B G

roup

co

mpa

nies

20

16

2017

.12.

31

- 10

,065

-

UAB

LITG

AS

Su

pplie

rs o

f liq

uefie

d na

tura

l ga

s te

rmin

al

2014

.10.

03 2

015.

12.3

1 10

0,00

0 -

67,4

30

112,0

65

35,8

30

67,4

30

(a)

On

5 D

ecem

ber 2

016,

the

Com

pany

and

the

Euro

pean

Inve

stm

ent B

ank

(Lux

embo

urg)

sig

ned

a gu

aran

tee

and

inde

mni

ty a

gree

men

t und

er w

hich

the

Com

pany

sec

ured

fulfil

men

t of a

ll cu

rrent

an

d fu

ture

obl

igat

ions

of s

ubsi

diar

y V

ilnia

us K

ogen

erac

inė

Jėga

inė

in a

mou

nt o

f E

UR

190

,000

th

ousa

nd u

nder

the

cred

it ag

reem

ent s

igne

d on

5 D

ecem

ber 2

016

with

the

Euro

pean

Inve

stm

ent

Bank

for

the

ter

m o

f 17

yea

rs.

Gua

rant

ee c

over

all

kind

s of

pay

able

s re

late

d to

utili

zatio

n of

pr

ovid

ed lo

an. M

axim

al a

mou

nt o

f gua

rant

ee is

not

def

ined

. As

at 3

1 D

ecem

ber 2

016,

no

amou

nt

was

with

draw

n by

Viln

iaus

Kog

ener

acin

ė Jė

gain

ė U

AB fr

om th

e cr

edit

of th

e E

urop

ean

Inve

stm

ent

Bank

.

(b)

Dur

ing

2016

The

Com

pany

and

the

Gro

up c

ompa

nies

ent

ered

int

erco

mpa

ny b

orro

wing

and

le

ndin

g ag

reem

ent (

cash

poo

l). U

nder

the

agre

emen

t, pa

rt of

a g

roup

com

pany

agr

ee to

lend

eac

h ot

her

thei

r fu

nds,

whi

ch a

re v

irtua

lly t

rans

ferre

d to

the

Gro

up's

corp

orat

e ac

coun

t, an

d th

at

cons

ider

atio

n be

pro

vide

d to

eac

h th

e G

roup

‘s m

embe

r usi

ng p

eer l

endi

ng p

latfo

rm. P

eer l

endi

ng

plat

form

ser

vices

pro

vided

by

the

com

mer

cial

ban

k Sw

edba

nk A

B wi

th w

hom

the

Gro

up e

nter

ed

grou

p ac

coun

t ag

reem

ent.

Acco

rdin

g to

the

int

erco

mpa

ny b

orro

wing

and

len

ding

agr

eem

ent

mem

bers

of t

he g

roup

can

bor

row

for p

erio

ds n

ot lo

nger

than

one

yea

r, an

d de

term

ined

inte

rest

ra

te is

equ

al to

the

lowe

st o

f pro

pose

d co

mm

ercia

l ban

k in

tere

st ra

te. A

s at

31

Dec

embe

r 201

6 to

tal a

mou

nt o

f len

ded

and

borro

wed

cas

h in

side

the

Gro

up w

as E

UR 3

5,89

0 th

ousa

nd, i

nclu

ding

EU

R 2

5,82

5 th

ousa

nd b

orro

wed

by th

e C

ompa

ny.

F-78

245496 Olive pp138-imp 27/06/2017 09:22 Page 78

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

171

AN

NU

AL R

EPO

RT 2

016

|

Con

tract

ual c

omm

itmen

ts

Und

er th

e pr

ovis

ions

of t

he n

atur

al g

as s

uppl

y ag

reem

ent w

ith G

azpr

om O

AO (t

he a

gree

men

t was

ta

ken

over

on

busi

ness

acq

uisi

tion)

, in

201

5 Li

etuv

os D

ujų

Tiek

imas

UAB

did

not

con

sum

e 59

milli

on m

³ of

gas

com

pare

d to

the

esta

blis

hed

min

imum

nat

ural

gas

con

sum

ptio

n vo

lum

e of

960

m

illio

n m

³ (20

14: 1

28.3

milli

on m

³ com

pare

d to

1 b

illion

m³).

Und

er th

e pr

ovis

ions

of t

he a

gree

men

t, Li

etuv

os D

ujų

Tiek

imas

UA

B ca

n fu

rther

con

sum

e it

over

the

next

3 y

ears

, pro

vide

d th

e co

ntra

ctua

l pa

ymen

t an

d na

tura

l ga

s co

nsum

ptio

n co

mm

itmen

ts h

ave

been

ful

fille

d. I

n 20

15 L

ietu

vos

Duj

ų Ti

ekim

as U

AB m

ade

a pr

epay

men

t of E

UR 2

6.9

milli

on fo

r par

t of n

atur

al g

as n

ot c

onsu

med

in 2

014

(Not

e 11

). Th

e pr

epai

d q

uant

ity o

f nat

ural

gas

was

fully

use

d in

201

6.

In M

ay 2

014,

Lie

tuvo

s D

ujos

AB

and

Gaz

prom

OAO

sig

ned

an a

gree

men

t reg

ardi

ng th

e re

duct

ion

of

the

pric

e fo

r na

tura

l gas

impo

rted

by L

ietu

vos

Duj

os A

B fo

r th

e pe

riod

from

1 J

anua

ry 2

013

to 3

1 D

ecem

ber 2

015.

Nat

ural

gas

impo

rt pr

ice

redu

ctio

n ef

fect

s fo

r the

per

iod

from

1 J

anua

ry 2

013

to 3

0 Ap

ril 2

014

rela

tes

to h

ouse

hold

and

non

-hou

seho

ld n

atur

al g

as u

sers

. N

atur

al g

as im

port

price

di

ffere

nce

effe

ct o

n no

n-ho

useh

old

user

s is

expe

cted

to b

e tra

nsfe

rred

to th

e us

ers

durin

g 20

15-2

016

or b

eyon

d, th

e di

ffere

nce

effe

ct to

hou

seho

ld u

sers

is e

xpec

ted

to b

e tra

nsfe

rred

durin

g 20

15-2

016-

2017

. The

unu

sed

bala

nce

of p

rice

diffe

renc

e am

ount

ed to

EU

R 1

9.0

milli

on a

s at

31

Dec

embe

r 201

6.

In re

spec

t of t

his

amou

nt a

pro

visio

n fo

r one

rous

con

tact

s is

reco

gnize

d (n

ote

23)

On

3 A

ugus

t 20

15,

Liet

uvos

Duj

ų Ti

ekim

as U

AB,

Liet

uvos

Duj

os A

B an

d G

azpr

om O

AO s

igne

d a

trila

tera

l ag

reem

ent,

unde

r wh

ich

all

right

s an

d ob

ligat

ions

per

tain

ing

to t

he n

atur

al g

as s

uppl

y ag

reem

ent (

whic

h wa

s co

nclu

ded

on 1

6 D

ecem

ber 1

999

betw

een

Gaz

prom

OAO

and

Lie

tuvo

s D

ujos

AB

) wer

e of

ficia

lly p

asse

d to

Lie

tuvo

s D

ujų

Tiek

imas

UAB

. In

Dec

embe

r 201

6, L

ietu

vos

Duj

ų Ti

ekim

as U

AB

and

PAO

Gaz

prom

agr

eed

on s

uppl

y of

nat

ural

gas

in

201

7. T

he a

gree

men

t con

tain

s ‘ta

ke-o

r-pay

’ cla

use

unde

r whi

ch L

ietu

vos

Duj

ų Ti

ekim

as U

AB h

as a

co

mm

itmen

t to

purc

hase

the

agre

ed m

inim

um q

uant

ity o

f nat

ural

gas

. Bas

ed o

n fo

reca

st c

onsu

mpt

ion

data

, Lie

tuvo

s D

ujų

Tiek

imas

UA

B pl

ans

to p

urch

ase

all a

gree

d qu

antit

y of

nat

ural

gas

dur

ing

2017

. Ba

sed

on it

s R

esol

utio

n N

o O

3-30

5 of

14

Oct

ober

201

6 O

n re

calcu

latin

g th

e pr

ice c

aps

for e

lect

ricity

di

strib

utio

n se

rvic

es p

rovi

ded

by E

nerg

ijos

Skirs

tym

o O

pera

toriu

s AB

thro

ugh

med

ium

and

low

vol

tage

ne

twor

ks fo

r the

yea

r 201

7, th

e Co

mm

issio

n se

t the

pric

e ca

p fo

r the

dis

tribu

tion

serv

ice

for 2

017

on

the

basis

of R

epor

t No

O5-

258

of 1

3 O

ctob

er 2

016

wher

e it

also

sta

ted

that

in th

e pe

riod

2014

–201

5 En

ergi

jos

Skirs

tym

o O

pera

toriu

s AB

ear

ned

addi

tiona

l re

turn

on

inve

stm

ents

am

ount

ing

to E

UR

84,9

61.6

thou

sand

, whi

ch e

xcee

ded

the

leve

l of p

rofit

per

mitt

ed b

y th

e C

omm

issio

n. T

he C

omm

issio

n de

cide

d to

adj

ust t

he p

rice

caps

for t

he d

istrib

utio

n se

rvic

es fo

r 201

7 by

1/3

of t

he 2

014–

2015

retu

rn

on in

vest

men

ts p

rese

nted

in e

xces

s of

the

leve

l of p

rofit

per

mitt

ed b

y th

e C

omm

issio

n. C

onse

quen

tly,

the

Com

miss

ion

esta

blis

hed

the

leve

l of r

even

ue fr

om d

istrib

utio

n ac

tiviti

es fo

r 201

7, w

hich

was

lowe

r by

EU

R 2

8,32

0.5

thou

sand

. It

was

deci

ded

that

the

rem

aini

ng a

mou

nt o

f 20

14–2

015

retu

rn o

n in

vest

men

ts in

exc

ess

of th

e le

vel o

f pro

fit p

erm

itted

by

the

Com

miss

ion

will

be re

flect

ed b

y ad

just

ing

the

pric

e ca

ps o

f the

ele

ctric

ity d

istri

butio

n se

rvic

es to

be

set f

or th

e C

ompa

ny fo

r the

upc

omin

g ye

ar

of t

he r

egul

ator

y pe

riod,

but

not

late

r th

an b

y th

e en

d of

the

reg

ulat

ory

perio

d. I

n th

e op

inio

n of

m

anag

emen

t of E

nerg

ijos

Skirs

tym

o O

pera

toriu

s AB

, an

exce

ss p

rofit

was

ear

ned

in 2

016,

the

exac

t am

ount

of w

hich

and

its

impa

ct o

n fu

ture

tarif

fs w

ill be

kno

wn la

ter.

Lega

l dis

pute

s Le

gal d

ispu

te b

etwe

en E

nerg

ijos

Skirs

tym

o O

pera

toriu

s AB

and

the

NC

C

In N

ovem

ber 2

014

and

Janu

ary

2015

Ene

rgijo

s Sk

irsty

mo

Ope

rato

rius

AB fi

led

a co

mpl

aint

to V

ilniu

s R

egio

nal A

dmin

istra

tive

Cou

rt wi

th re

ques

t to

annu

l cer

tain

reso

lutio

ns o

f the

Com

miss

ion

and

to o

blig

e th

e Co

mm

issio

n to

elim

inat

e th

e vio

latio

ns c

omm

itted

det

erm

inin

g th

e pr

ice

caps

for

ele

ctric

ity

dist

ribut

ion

thro

ugh

med

ium

and

low

volta

ge n

etwo

rks.

Vio

latio

ns c

omm

itted

det

erm

inin

g th

e pr

ice

caps

for e

lect

ricity

dist

ribut

ion

resu

lted

in lo

wer r

even

ue e

arne

d. V

ilniu

s R

egio

nal A

dmin

istra

tive

Cou

rt re

ject

ed c

ompl

aint

in it

s en

tiret

y. E

nerg

ijos

Skirs

tym

o O

pera

toriu

s AB

file

d an

app

eal i

n 20

16. T

he

favo

rabl

e re

solu

tion

of t

he d

isput

e wo

uld

resu

lt in

hig

her

price

cap

s an

d hi

gher

rev

enue

in f

utur

e pe

riods

. In

Jul

y 20

15, E

nerg

ijos

Skirs

tym

o O

pera

toriu

s AB

file

d a

com

plai

nt to

Viln

ius

Reg

iona

l Adm

inis

trativ

e Co

urt w

ith re

ques

t to

anul

l the

Com

mis

sion

’s re

solu

tion

rega

rdin

g th

e br

each

of t

he te

rms

of re

gula

ted

activ

ities

by E

nerg

ijos

Skirs

tym

o O

pera

toriu

s AB

, whe

reby

it w

as c

oncl

uded

that

Ene

rgijo

s Sk

irsty

mo

Ope

rato

rius A

B br

each

ed th

e te

rms

of lic

ense

d ac

tivitie

s, n

amel

y, th

at e

xpen

ses

allo

cate

d by

Ene

rgijo

s Sk

irsty

mo

Ope

rato

rius

AB to

regu

late

d di

strib

utio

n an

d pu

blic

supp

ly se

rvic

es w

ere

on n

o va

lid g

roun

ds

high

er th

an E

nerg

ijos

Skirs

tym

o O

pera

toriu

s AB

was

act

ually

allo

wed

to a

lloca

te. I

n its

com

plai

nt,

Ener

gijo

s Sk

irsty

mo

Ope

rato

rius

AB a

lso

requ

este

d th

at th

e C

ourt

reco

gnis

e th

e pe

nalty

of E

UR

300

th

ousa

nd a

s un

grou

nded

. The

favo

rabl

e re

solu

tion

of th

e di

sput

e wo

uld

resu

lt in

hig

her p

rice

caps

and

hi

gher

reve

nue

in fu

ture

per

iods

. Le

gal d

ispu

te b

etwe

en E

nerg

ijos

Skirs

tym

o O

pera

toriu

s AB

and

Viln

iaus

Ene

rgija

UAB

Vi

lnia

us E

nerg

ija U

AB (t

he c

laim

ant)

filed

a c

laim

to V

ilniu

s C

ount

y C

ourt,

whe

reby

it re

ques

ted

to

awar

d da

mag

es o

f EU

R 9

,284

milli

on fr

om E

nerg

ijos

Skirs

tym

o O

pera

toriu

s AB

. Acc

ordi

ng to

the

clai

man

t, it

incu

rred

loss

es o

f EU

R 9

,284

milli

on, b

ecau

se in

201

4 En

ergi

jos

Skirs

tym

o O

pera

toriu

s AB

pu

rcha

sed

only

that

vol

ume

of s

uppo

rted

elec

trici

ty, w

hich

was

pro

duce

d un

der t

he te

chni

cal m

inim

um

mod

e at

the

ther

mal

pow

er p

lant

s ow

ned

by th

e cl

aim

ant.

The

Gro

up d

oes

not a

ccou

nt fo

r pro

visio

n in

re

spec

t of c

laim

bec

ause

Des

crip

tion

of P

SO S

ervic

es d

o no

t stip

ulat

e th

at th

e re

spon

dent

is o

blig

ed

to p

urch

ase

full

volu

me

of e

lect

ricity

pro

duce

d at

ther

mal

pow

er p

lant

s. A

t 17

Mar

ch 2

017

plai

ntiff

re

vised

sco

pe o

f th

e cl

aim

and

app

lies

for

EUR

10,

712

thou

sand

dam

age

com

pens

atio

n aw

ard.

C

lose

st c

ourt

hear

ing

will

be h

eld

at 2

9 M

ay 2

017.

Le

gal d

ispu

te b

etwe

en L

ietu

vos

Dujo

s AB

and

the

Lith

uani

an M

inis

try o

f Ene

rgy

On

25 M

arch

201

1, t

he L

ithua

nian

Min

istry

of

Ener

gy d

eman

ded

Viln

ius

Reg

iona

l C

ourt

initia

te

inve

stig

atio

n of

ope

ratio

ns o

f Lie

tuvo

s D

ujos

AB

and

inve

stig

ate

if op

erat

ions

of L

ietu

vos

Duj

os A

B,

Boar

d M

embe

rs a

nd/o

r th

e M

anag

ing

Dire

ctor

wer

e in

appr

opria

te.

On

3 Se

ptem

ber

2012

Viln

ius

Reg

iona

l Cou

rt ru

led

in fa

vor o

f the

cla

iman

t to

initia

te in

vest

igat

ion

of o

pera

tions

of L

ietu

vos

Duj

os

AB. I

n 20

16 T

he L

ithua

nian

Min

istry

of E

nerg

y, L

ietu

vos

Ener

gija

and

Ene

rgijo

s Sk

irsty

mo

Ope

rato

rius

AB (

whic

h to

ok o

ver

right

s an

d ob

ligat

ions

of L

ietu

vos

Duj

os A

B) s

igne

d pe

acef

ul c

ourt

settl

emen

t ag

reem

ent ,

as

well a

s th

e re

ques

t on

waive

r of t

he c

laim

. On

30 M

arch

201

6, th

e Li

thua

nian

Sup

rem

e C

ourt

acce

pted

the

waive

r of c

laim

, app

rove

d th

e pe

acef

ul s

ettle

men

t agr

eem

ent a

nd te

rmin

ated

the

civil

cas

e.

F-79

245496 Olive pp138-imp 27/06/2017 09:22 Page 79

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

172

AN

NU

AL R

EPO

RT 2

016

|

Lega

l dis

pute

bet

wee

n Li

etuv

os D

ujų

Tiek

imas

UA

B an

d Vi

lnia

us E

nerg

ija U

AB

O

n 23

Jan

uary

201

5, V

ilnia

us E

nerg

ija U

AB f

iled

EUR

15,2

00 t

hous

and

clai

m t

o Li

etuv

os D

ujų

Tiek

imas

UAB

rega

rdin

g th

e am

endm

ent t

o th

e pr

icing

rule

s an

d aw

ardi

ng o

f the

ove

rpai

d am

ount

for

natu

ral g

as a

cqui

red.

On

21 J

anua

ry 2

016,

the

cour

t of f

irst i

nsta

nce

pass

ed th

e ru

ling

wher

eby

the

clai

m o

f Viln

iaus

Ene

rgija

UAB

was

dism

isse

d. O

n 19

Feb

ruar

y 20

16, V

ilnia

us E

nerg

ija U

AB fi

led

an

appe

al. B

ased

on

its d

ecis

ion

of 1

7 N

ovem

ber 2

016,

the

cour

t of a

ppea

l lef

t the

rulin

g of

the

cour

t of

first

inst

ance

unc

hang

ed, i

.e. t

he c

laim

was

dis

mis

sed.

Le

gal d

ispu

te b

etw

een

Liet

uvos

Duj

ų Ti

ekim

as U

AB

and

Amili

na U

AB

In 2

015,

Lie

tuvo

s D

ujų

Tiek

imas

UA

B cu

stom

er A

milin

a AB

file

d a

claim

rega

rdin

g th

e am

endm

ent t

o th

e pr

icing

rule

s es

tabl

ishe

d in

the

natu

ral g

as s

uppl

y ag

reem

ents

and

awa

rd o

f ove

rpai

d am

ount

for

the

acqu

ired

natu

ral g

as. O

n 7

Oct

ober

201

6, V

ilniu

s C

ount

y C

ourt

reso

lved

to r

ejec

t the

cla

im o

f Am

ilina

AB,

wher

eby

it re

ques

ted

the

cour

t to

awa

rd a

mou

nt o

f EU

R 1,

038

thou

sand

fro

m t

he

Com

pany

. On

4 N

ovem

ber 2

016,

Am

ilina

AB fi

led

an a

ppea

l of E

UR 1

,038

thou

sand

to th

e C

ourt

of

Appe

al o

f Lith

uani

a.

Lega

l dis

pute

s be

twee

n Li

etuv

os E

nerg

ijos

Gam

yba

AB a

nd th

e C

omm

issio

n Li

etuv

os E

nerg

ijos

Gam

yba

AB a

ppea

led

the

Com

miss

ion’

s R

esol

utio

n N

o O

3-75

7 of

7 A

ugus

t 201

4 O

n su

rvey

resu

lts o

f ele

ctric

ity g

ener

atio

n m

arke

t. Th

e Co

mm

issio

n’s

Res

olut

ion,

sta

ted

that

Lie

tuvo

s En

ergi

jos

Gam

yba

AB is

an

unde

rtaki

ng h

avin

g si

gnific

ant p

ower

in th

e m

arke

t of e

lect

ricity

gen

erat

ion

serv

ices

. On

17 O

ctob

er 2

016,

the

Lith

uani

an S

upre

me

Adm

inist

rativ

e C

ourt

adop

ted

a de

cisio

n to

ac

cept

the

Lie

tuvo

s En

ergi

jos

Gam

yba

AB’s

app

eal

and

to r

epea

l th

e di

sput

ed p

rovi

sion

s of

the

Co

mm

issio

n’s

Res

olut

ion.

No

furth

er re

med

y ex

ists

aga

inst

the

cour

t’s d

ecis

ion

and

Liet

uvos

Ene

rgijo

s G

amyb

a AB

sha

ll no

t fur

ther

be

rega

rded

as

an u

nder

taki

ng h

avin

g si

gnific

ant p

ower

in th

e m

arke

t of

elec

trici

ty g

ener

atio

n.

Liet

uvos

Ene

rgijo

s G

amyb

a AB

file

d a

com

plai

nt to

Viln

ius

Reg

iona

l Adm

inist

rativ

e C

ourt

with

requ

est

to a

nnul

the

Com

miss

ion’

s R

esol

utio

n N

o O

3-81

8 of

30

Sept

embe

r 201

4. O

n 21

Sep

tem

ber 2

015,

Vi

lniu

s R

egio

nal A

dmin

istra

tive

Cour

t mad

e a

decis

ion

to r

ejec

t Li

etuv

os E

nerg

ijos

Gam

yba

AB’s

co

mpl

aint

. Bas

ed o

n th

e ab

ove-

men

tione

d R

esol

utio

n, L

ietu

vos

Ener

gijo

s G

amyb

a A

B’s

reve

nue

from

PS

O s

ervic

e fe

es fo

r the

yea

r 201

5 wa

s re

duce

d by

EU

R 6

.14

milli

on, a

nd it

s re

venu

e fro

m c

apac

ity

rese

rve

serv

ices

was

redu

ced

by E

UR

3.7

2 m

illion

. On

20 D

ecem

ber 2

016,

the

Lith

uani

an S

upre

me

Adm

inist

rativ

e C

ourt

adop

ted

a de

cisio

n to

reje

ct L

ietu

vos

Ener

gijo

s G

amyb

a AB

’s a

ppea

l. Th

e ca

se

was

clo

sed

and

no fu

rther

rem

edy

exis

ts a

gain

st th

e co

urt’s

dec

isio

n. T

he m

anag

emen

t of L

ietu

vos

Ener

gijo

s G

amyb

a AB

inte

nds

to re

fer t

o th

e co

urt w

ith re

ques

t to

rene

w th

e pr

ocee

ding

s.

Liet

uvos

Ene

rgijo

s G

amyb

a AB

file

d a

com

plai

nt to

Viln

ius

Reg

iona

l Adm

inist

rativ

e C

ourt

in re

spec

t of

the

Com

mis

sion

‘s R

esol

utio

ns N

o O

3-85

2 of

17

Oct

ober

201

4 an

d N

o O

3-86

6 of

30

Oct

ober

201

4.

Adop

ted

by t

he C

omm

issio

n re

solu

tion

requ

ered

to

redu

ce r

even

ue f

rom

sup

porte

d el

ectri

city

pr

oduc

ed b

y EU

R 6

.14

milli

on, a

nd to

redu

ce re

venu

e fro

m c

apac

ity re

serv

e se

rvic

es b

y EU

R 7

.44

milli

on d

urin

g 20

15 –

201

6 pe

riod.

The

Gro

up d

oes

not a

ccou

nt fo

r any

pro

visio

n in

resp

ect o

f dec

isio

ns

adop

ted

by R

esol

utio

ns b

ecau

se e

stim

ates

of

retu

rn o

n in

vest

men

ts g

iven

in t

he r

esol

utio

ns a

re

inac

cura

te a

nd in

corre

ct.

Liet

uvos

Ene

rgijo

s G

amyb

a AB

file

d a

com

plai

nt to

Viln

ius

Regi

onal

Adm

inist

rativ

e Co

urt i

n re

spec

t of

the

Com

mis

sion

’s R

esol

utio

ns N

o O

3-84

0 of

19

Dec

embe

r 201

4 N

o O

3-86

6 of

30

Oct

ober

201

4 an

d N

o O

3-93

9 of

19

Dec

embe

r 201

4. A

dopt

ing

thos

e re

solu

tions

the

Com

mis

sion

redu

ced

the

budg

et

of P

SO s

ervic

es fe

es a

lloca

ted

to L

ietu

vos

Ener

gijo

s G

amyb

a AB

for t

he y

ear 2

015

by E

UR

5,4

40

thou

sand

. The

Gro

up m

anag

emen

t the

n de

cide

d to

acc

ount

for

the

abov

e-m

entio

ned

redu

ctio

n of

re

venu

e in

the

Gro

up’s

con

solid

ated

fina

ncia

l sta

tem

ents

for

2015

. O

n 5

Dec

embe

r 20

16, V

ilniu

s R

egio

nal A

dmin

istra

tive

Cou

rt ac

cept

ed th

e C

ompa

ny‘s

app

eal a

nd re

peal

ed th

e di

sput

ed p

rovis

ions

of

the

Res

olut

ion.

The

Gro

up w

ill ac

coun

t for

dec

ision

of c

ourt

afte

r the

Com

mis

sion

will

adop

t req

uest

to

impl

emen

t the

cou

rt’s

deci

sion

. Li

etuv

os E

nerg

ijos

Gam

yba

AB fi

led

a co

mpl

aint

to V

ilniu

s Re

gion

al A

dmin

istra

tive

Cou

rt in

resp

ect o

f th

e C

omm

issi

on‘s

Res

olut

ion

No

O3-

875

of 3

0 O

ctob

er 2

014,

Res

olut

ion

No

O3-

934

of 1

1 D

ecem

ber

2014

and

Res

olut

ion

No

O3-

875

of 3

0 O

ctob

er 2

014.

The

abo

ve m

entio

ned

reso

lutio

ns o

f th

e C

omm

issio

n ha

d un

ilate

rally

est

ablis

hed

price

com

pone

nts

for

heat

pro

duce

d by

the

Lie

tuvo

s En

ergi

jos

Gam

yba

AB u

sing

inac

cura

te c

alcu

latio

ns o

f the

retu

rn o

n in

vest

men

t. At

17

Nov

embe

r 201

5 Vi

lniu

s R

egio

nal A

dmin

istra

tive

Cour

t mad

e a

decis

ion

not f

avor

able

to L

ietu

vos

Ener

gijo

s G

amyb

a AB

. At 7

Mar

ch, 2

017

Supr

eme

Adm

inist

rativ

e C

ourt

of L

ithua

nia

reje

cted

Com

pany

’s a

ppea

l. W

here

as

the

Liet

uvos

Ene

rgijo

s G

amyb

a AB

has

app

lied

the

pric

e un

ilate

rally

set

by

the

Com

miss

ion,

ther

efor

e th

e de

cisio

n of

the

Supr

eme

Adm

inist

rativ

e C

ourt

of L

ithua

nia

will

not h

ave

a di

rect

impa

ct o

n th

e C

ompa

ny’s

fina

ncia

l res

ults

. Le

gal d

ispu

tes

of T

uule

ener

gia

In 2

006

Varb

la m

unici

pal g

over

nmen

t iss

ued

occu

panc

y pe

rmits

to T

uule

ener

gia

OU

to e

rect

two

Tam

ba w

ind

turb

ines

. In

201

3 ap

peal

was

pre

sent

ed t

o Ta

llinn

Adm

inist

rativ

e C

ourt

to a

nnul

oc

cupa

ncy

perm

its is

sued

by

Varb

la m

unici

pal g

over

nmen

t at t

he re

ason

of e

rect

ed w

ind

turb

ines

are

no

t in

acco

rdan

ce w

ith d

etai

led

spat

ial p

lan

and

also

the

noise

was

not

in s

atis

fact

ory

cond

itions

. Ap

peal

was

not

sat

isfie

d by

Tal

linn

Adm

inist

rativ

e C

ourt

and

also

by

Tallin

n C

ircui

t Cou

rt in

the

seco

nd

inst

ance

in 2

015.

Cas

satio

n ap

peal

was

sat

isfie

d by

Sup

rem

e C

ourt

in 2

016.

As

a re

sult

occu

panc

y pe

rmits

wer

e an

nulle

d an

d at

the

mom

ent

the

Com

pany

has

no

any

occu

panc

y pe

rmits

unt

il al

l pr

oced

ures

will

be fi

lled

for r

ecei

ving

new

occu

panc

y pe

rmits

. Alth

ough

cou

rt ru

ling

is ne

gativ

e, it

is

impo

rtant

to n

ote

that

the

rulin

g its

elf d

oes

not e

ntai

l an

inst

ruct

ion

to d

isman

tle th

e wi

ndm

ills. T

he

judg

emen

t em

phas

is th

at th

ere

is a

need

for a

new

pro

ceed

ing

in o

rder

to is

sue

lawf

ul p

erm

its fo

r the

tu

rbin

es. T

he C

ourt

foun

d th

at a

ll th

e ar

gum

ents

rela

ting

to d

iscre

panc

ies

rega

rdin

g th

e ge

ogra

phic

al

posi

tioni

ng o

f the

turb

ines

are

not

foun

ded.

Thu

s, it

can

be

deriv

ed fr

om ju

dgem

ent t

hat t

he tu

rbin

es

can

be p

ositio

ned

wher

e th

ey s

tand

at t

he m

omen

t, ho

weve

r the

que

stio

n re

mai

ns h

ow th

e wi

ndm

ills

affe

ct n

eigh

borin

g pr

oper

ties

and

whet

her t

here

sho

uld

be re

stric

tions

impo

sed

on o

pera

ting

of th

e tu

rbin

es.

Tax

audi

ts

The

Tax

Auth

oritie

s m

ay a

t any

tim

e du

ring

5 su

cces

sive

yea

rs a

fter t

he e

nd o

f the

repo

rting

tax

year

in

spec

t th

e bo

oks

and

acco

untin

g re

cord

s an

d as

sess

add

ition

al t

axes

or

fines

. Th

e G

roup

’s

man

agem

ent i

s no

t awa

re o

f any

circ

umst

ance

s th

at m

ight

resu

lt in

a p

oten

tial m

ater

ial l

iabi

lity in

this

resp

ect.

Com

mitm

ent t

o pa

y fo

r sha

re c

apita

l inc

reas

e of

the

subs

idia

ry

On

19 D

ecem

ber 2

016,

the

Com

pany

, bei

ng a

sol

e sh

areh

olde

r, pa

ssed

a d

ecisi

on to

incr

ease

the

shar

e ca

pita

l of V

ilnia

us K

ogen

erac

inė

Jėga

inė

UA

B by

EU

R 2

0,00

0 th

ousa

nd th

roug

h th

e iss

ue o

f 68

,965

,518

new

ord

inar

y re

gist

ered

sha

res

with

the

nom

inal

val

ue o

f EU

R 0

.29

each

. Th

e in

itial

cont

ribut

ion,

i.e.

¼ o

f the

sub

scrib

ed v

alue

of s

hare

s, a

mou

ntin

g to

EU

R 5

,000

thou

sand

was

pai

d by

Li

etuv

os E

nerg

ija U

AB o

n 27

Dec

embe

r 201

6. T

he re

mai

ning

par

t of t

he p

rice

for s

ubsc

ribed

sha

res

will b

e pa

id b

y the

Com

pany

with

in 1

2 m

onth

s fro

m th

e da

te o

n wh

ich

the

shar

e su

bscr

iptio

n ag

reem

ent

was

sign

ed (N

ote

8).

F-80

245496 Olive pp138-imp 27/06/2017 09:22 Page 80

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

173

AN

NU

AL R

EPO

RT 2

016

|

37 R

elat

ed-p

arty

tran

sact

ions

As

at 3

1 D

ecem

ber 2

016

and

2015

, the

sol

e sh

areh

olde

r was

the

Repu

blic

of L

ithua

nia

repr

esen

ted

by th

e Li

thua

nian

Min

istry

of F

inan

ce. F

or th

e pu

rpos

es o

f dis

clos

ure

of re

late

d pa

rties

, the

Rep

ublic

of

Lith

uani

a ex

clud

es c

entra

l and

loca

l gov

ernm

ent a

utho

ritie

s. T

he d

iscl

osur

es c

ompr

ise tr

ansa

ctio

ns

and

bala

nces

of t

hese

tran

sact

ions

with

the

shar

ehol

der,

subs

idia

ries

(the

Com

pany

's tra

nsac

tions

), as

soci

ates

and

all

entit

ies

cont

rolle

d by

or u

nder

sig

nific

ant i

nflu

ence

of t

he s

tate

(tra

nsac

tions

with

th

ese

entit

ies

are

disc

lose

d on

ly if

they

are

mat

eria

l), a

nd k

ey m

anag

emen

t and

thei

r cl

ose

fam

ily

mem

bers

. Th

e G

roup

’s t

rans

actio

ns w

ith r

elat

ed p

artie

s du

ring

2016

and

yea

r-end

bal

ance

s ar

isin

g on

thes

e tra

nsac

tions

as

at 3

1 D

ecem

ber 2

016

are

pres

ente

d be

low:

Rela

ted

part

ies

Fin

an

ce

inc

om

e

(co

sts

)

Am

ou

nts

p

ayab

le

Am

ou

nts

re

ceiv

ab

le

Sale

s

Pu

rch

ases

EPSO

-G U

AB

2,65

3 -

210,

414

32

- Li

tgrid

AB

(79)

11

,429

5,

058

50,9

87

102,

436

BALT

POO

L UA

B -

14,9

45

3,94

1 66

,494

91

,143

TE

TAS

UAB

66

4,

132

337

1,59

7 14

,690

Am

ber G

rid A

B

- 5,

669

3,43

0 36

,658

35

,130

LI

TGR

ID P

ower

Lin

k Se

rvic

e UA

B -

- 19

17

5 -

GET

Bal

tic

- 74

5 2,

538

3,73

5 3,

228

Asso

ciate

s an

d ot

her r

elat

ed

parti

es o

f the

Gro

up

- -

295

884

-

To

tal

2,6

40

36,9

20

226,0

32

160,5

62

246,6

27

The

Gro

up’s

tra

nsac

tions

with

rel

ated

par

ties

durin

g 20

15 a

nd y

ear-e

nd b

alan

ces

aris

ing

on th

ese

trans

actio

ns a

s at

31

Dec

embe

r 201

5 ar

e pr

esen

ted

belo

w:

Rela

ted

part

ies

Fin

an

ce

inc

om

e

(co

sts

)

Am

ou

nts

p

ayab

le

Am

ou

nts

re

ceiv

ab

le

Sale

s

Pu

rch

ases

EPSO

-G U

AB

3,91

9 -

239,

959

6 -

Litg

rid A

B (2

) 6,

997

2,37

0 21

,638

64

,395

BA

LTPO

OL

UAB

- 15

,253

10

,700

82

,939

92

,458

TE

TAS

UAB

11

0 4,

042

183

1,69

3 15

,382

Am

ber G

rid A

B

- 77

34

31

6 8,

594

Asso

ciate

s an

d ot

her r

elat

ed

parti

es o

f the

Gro

up

- 23

2 13

8 30

4 1,

483

To

tal

4,0

27

26,6

01

253,3

84

106,8

96

182,3

12

The

maj

or s

ale

and

purc

hase

tra

nsac

tions

with

rel

ated

par

ties

in 2

016

and

2015

com

prise

d tra

nsac

tions

with

the

ent

ities

cont

rolle

d by

the

Lith

uani

an M

inist

ry o

f Fi

nanc

e: L

itgrid

AB

and

BA

LTP

OO

L U

AB.

The

Gro

up’s

pur

chas

es fr

om th

ese

entit

ies

mai

nly

incl

uded

pur

chas

es o

f ele

ctric

ity,

capa

city,

tran

smis

sion

, PSO

serv

ices

and

gas.

Sal

es tr

ansa

ctio

ns in

clude

d sa

les

of e

lect

ricity

, cap

acity

an

d PS

O s

ervic

es.

Amou

nt r

ecei

vabl

e fro

m E

PSO

-G U

AB r

epre

sent

s un

paid

am

ount

on

disp

osal

of

Litg

rid A

B, t

he

outs

tand

ing

bala

nce

of th

e lo

an g

rant

ed a

nd in

tere

st a

ccru

ed th

ereo

n. F

inan

ce c

osts

incl

ude

inte

rest

ch

arge

d du

ring

the

year

. Tr

ansa

ctio

ns w

ith o

ther

sta

te-o

wned

ent

ities

incl

uded

regu

lar b

usin

ess

trans

actio

ns a

nd th

eref

ore

they

ar

e no

t disc

lose

d.

The

Com

pany

’s tr

ansa

ctio

ns w

ith re

late

d pa

rties

dur

ing

2016

and

yea

r-end

bal

ance

s ar

ising

on

thes

e tra

nsac

tions

as

at 3

1 D

ecem

ber 2

016

are

pres

ente

d be

low:

Rela

ted

part

ies

F

ina

nce

in

co

me

F

ina

nce

co

sts

A

mo

un

ts

pa

ya

ble

A

mo

un

ts

receiv

ab

le

Sale

s

Pu

rch

as

es

Su

bsid

iari

es

En

ergi

jos

Skirs

tym

o O

pera

toriu

s AB

5,

180

401

5,82

3 23

5 75

0 -

Liet

uvos

Ene

rgijo

s G

amyb

a AB

4,

391

353

17,2

02

1,09

9 21

9 -

EUR

AKR

AS U

AB

94

3 1,

067

14

5 -

Liet

uvos

Duj

ų Ti

ekim

as U

AB

-

37

6,00

8 24

10

8 -

NT

Vald

os U

AB

3 2

4,94

6 33

11

8 34

2 Te

chno

logi

jų ir

Inov

acijų

Cen

tras

UAB

-

- 62

20

39

22

5 D

uom

enų

Logi

stik

os C

entra

s U

AB

53

4

54

7 29

-

Ene

rget

ikos

Pas

laug

ų ir

Ran

gos

Org

aniz

acija

UAB

28

-

- 2,

967

127

-

Tuul

eene

rgia

OU

21

1 -

- 4,

902

- -

Ener

gijo

s Ti

ekim

as U

AB

3 2

- 28

69

-

LITG

AS U

AB

816

- -

18

37

- Pu

blic

Inst

itutio

n Tr

aini

ng C

entre

fo

r Ene

rgy

Spec

ialis

ts

- -

- 2

10

-

Elek

troni

nių

Mok

ėjim

ų Ag

entū

ra U

AB

- -

- 11

43

-

Vers

lo A

ptar

navim

o C

entra

s U

AB

2 -

79

26

118

275

VAE

SPB

UAB

-

- -

1 2

- Vi

lnia

us K

ogen

erac

inė

Jėga

inė

UAB

-

- -

5,01

1 11

4 -

Kau

no K

ogen

erac

inė

Jėga

inė

UA

B

- -

- 80

66

-

Oth

er

rela

ted

part

ies

-

- -

- -

- EP

SO-G

UAB

2,

653

- -

210,

410

- -

To

tal

13,4

34

802

35,2

41

224

,88

8

1,8

54

842

The

com

pany

's sa

les t

o re

late

d pa

rties

dur

ing

2016

am

ount

s to

EUR

1,8

54 th

ousa

nd. E

UR

, whi

le s

ales

re

venu

e in

201

6 is

EUR

1,80

2 th

ousa

nd. T

he d

iffer

ence

of E

UR

52

thou

sand

com

prise

com

pens

ated

ex

pens

es fo

r goo

ds a

nd s

ervic

es p

urch

ased

on

beha

lf of

the

Com

pany

but

act

ually

use

d to

ben

efit

rela

ted

parti

es.

F-81

245496 Olive pp138-imp 27/06/2017 09:22 Page 81

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

174

AN

NU

AL R

EPO

RT 2

016

|

The

Com

pany

’s tr

ansa

ctio

ns w

ith re

late

d pa

rties

dur

ing

2015

and

yea

r-end

bal

ance

s ar

ising

on

thes

e tra

nsac

tions

as

at 3

1 D

ecem

ber 2

015

are

pres

ente

d be

low:

Rela

ted

part

ies

F

ina

nce

in

co

me

F

ina

nce

co

sts

A

mo

un

ts

pa

ya

ble

A

mo

un

ts

receiv

ab

le

Sale

s

Pu

rch

as

es

S

ub

sid

iari

es

LE

STO

AB

- 40

2 34

,682

14

4 64

5 58

,906

Li

etuv

os E

nerg

ijos

Gam

yba

AB

- 32

4 28

,253

-

350

48,5

20

Liet

uvos

Duj

os A

B -

- -

119

369

- Li

etuv

os D

ujų

Tiek

imas

UA

B

- -

- 47

16

0 -

LITG

AS U

AB

2,00

3 -

- 17

0 30

-

NT

Vald

os U

AB

- -

35

39

109

294

Kaun

o En

erge

tikos

Rem

onta

s U

AB

- -

- 10

2 85

61

Ve

rslo

Apt

arna

vimo

Cen

tras

UAB

-

- -

3 19

9 35

En

ergi

jos

Tiek

imas

UAB

-

- -

20

48

- EL

EKTR

OS

TIN

KLO

PAS

LAU

GO

S U

AB

- -

- 2,

939

78

- Te

chno

logi

jų ir

Inov

acijų

Cen

tras

UAB

-

- 8

26

215

44

VAE

SPB

UAB

-

- -

4 22

-

Ene

rget

ikų

mok

ymų

cent

ras

VšĮ

-

- -

13

26

11

Duo

men

ų Lo

gist

ikos

Cen

tras

UA

B

- 2

321

- 29

52

9 O

ther

rela

ted

part

ies

EP

SO-G

UAB

3,

919

- -

239,

957

6 -

Litg

rid A

B -

2 18

8 -

- 31

2 T

ota

l 5,9

22

730

63,4

87

243

,58

3

2,3

71

108

,71

2

In 2

015,

sal

es in

clude

d sa

les

of m

anag

emen

t ser

vices

that

the

Com

pany

sta

rted

rend

erin

g to

the

Gro

up e

ntiti

es.

The

divid

ends

dec

lare

d in

201

6 an

d 20

15 a

re d

isclo

sed

in N

ote

35.

Com

pens

atio

n to

key

man

agem

ent:

Gro

up

Co

mp

an

y

2016

2015

2016

2015

Sala

ries

and

othe

r sho

rt-te

rm b

enef

its to

man

agem

ent

pers

onne

l 3

,615

4,5

17

71

1

700

W

here

of: T

erm

inat

ion

bene

fits

and

bene

fits

to B

oard

M

embe

rs

360

733

73

9

2 N

umbe

r of m

anag

emen

t sta

ff 6

6

71

1

1

10

Man

agem

ent

in t

he t

able

abo

ve i

nclu

des

head

s of

adm

inist

ratio

n an

d th

eir

depu

ties

of a

ll th

e su

bsid

iarie

s.

38 S

egm

ent r

epor

ting

Ope

ratin

g se

gmen

ts a

re re

porte

d in

a m

anne

r con

siste

nt w

ith th

e in

tern

al re

porti

ng p

rovid

ed to

the

chie

f ope

ratin

g de

cisio

n-m

aker

. The

chi

ef o

pera

ting

decis

ion-

mak

er, w

ho is

resp

onsi

ble

for a

lloca

ting

reso

urce

s an

d as

sess

ing

perfo

rman

ce o

f the

ope

ratin

g se

gmen

ts, h

as b

een

iden

tifie

d as

the

Boar

d th

at m

akes

stra

tegi

c de

cisio

ns.

In th

e op

inio

n of

the

Man

agem

ent,

the

Gro

up h

as th

ree

oper

atin

g se

gmen

ts:

- Su

pply

and

dist

ribut

ion

of e

lect

ricity

, gas

dist

ribut

ion

(runn

ing

by E

nerg

ijos

Skirs

tym

o O

pera

toriu

s,

AB);

- El

ectri

city

gene

ratio

n (ru

nnin

g by

Lie

tuvo

s En

ergi

jos

Gam

yba

AB, E

urak

ras

UAB

, Tuu

leen

ergi

a O

U);

- E

lect

ricity

and

gas

trad

e (ru

nnin

g by

Lie

tuvo

s D

ujų

Tiek

imas

UAB

, Ene

rgijo

s Ti

ekim

as U

AB, L

itgas

UA

B).

To O

ther

seg

men

ts a

re a

lloca

ted:

- su

ppor

t ser

vice

s (N

T V

aldo

s U

AB, E

nerg

etik

os p

asla

ugų

ir ra

ngos

org

aniz

acija

UAB

, Tec

hnol

ogijų

ir

Inov

acijų

cen

tras

UAB

, Ver

slo a

ptar

navim

o ce

ntra

s UA

B);

- ot

her n

on-c

ore

activ

ities

(U

AB E

nerg

etik

os p

asla

ugų

ir ra

ngos

org

aniz

acija

, Duo

men

ų lo

gist

ikos

ce

ntra

s, U

AB,

VšĮ

Ene

rget

ikų

mok

ymo

cent

ras)

;

- sp

ecia

l pu

rpos

e en

titie

s wh

ich

are

resp

onsi

ble

for

impl

emen

tatio

n of

ass

igne

d pr

ojec

ts a

nd

cons

truct

ion

of n

ew c

ogen

erat

ion

plan

ts (V

AE S

PB U

AB, K

auno

Kog

ener

acin

ė Jė

gain

ė U

AB a

nd

Viln

iaus

Kog

ener

acin

ė jė

gain

ė);

- se

rvic

e en

titie

s (E

lekt

roni

nių

mok

ėjim

ų ag

entū

ra, U

AB, U

AB E

nerg

ijos

spre

ndim

ų ce

ntra

s);

- al

so p

aren

t co

mpa

ny L

ietu

vos

Ener

gija

UAB

, wh

ich

does

not

con

stitu

te s

epar

ate

oper

atin

g se

gmen

t, ho

weve

r is

disc

lose

d se

para

tely,

as

its n

et p

rofit

exc

eeds

10%

of n

et p

rofit

of a

ll pr

ofit

repo

rting

seg

men

ts. S

uppo

rt se

rvic

e en

titie

s an

d sp

ecia

l pur

pose

ent

ities

are

agg

rega

ted

as n

one

of th

em in

divid

ually

mee

t crit

eria

of a

an

oper

atin

g se

gmen

t.

The

Gro

up h

as s

ingl

e ge

ogra

phica

l seg

men

t – R

epub

lic o

f Lith

uani

a, e

lect

ricity

sal

es in

Lat

via a

nd

Esto

nia

are

cons

ider

ed n

ot s

igni

fican

t. Th

e ch

ief o

pera

ting

deci

sion-

mak

er m

onito

rs th

e re

sults

with

re

fere

nce

to th

e fin

anci

al re

ports

that

hav

e be

en p

repa

red

usin

g th

e sa

me

acco

untin

g po

licie

s as

thos

e us

ed fo

r the

pre

para

tion

of th

e fin

anci

al s

tate

men

ts in

acc

orda

nce

with

IFR

S, i.

e. in

form

atio

n on

pro

fit

or lo

ss, i

nclu

ding

the

repo

rted

amou

nts

of re

venu

e an

d ex

pens

es. T

he p

rimar

y pe

rform

ance

mea

sure

is

EBI

DTA,

whi

ch is

cal

cula

ted

base

d on

the

fin

anci

al s

tate

men

ts in

acc

orda

nce

with

IFR

S an

d ad

just

ed to

sel

ecte

d ite

ms

whic

h ar

e no

t rec

ogni

zed

unde

r IFR

S. T

he B

oard

of t

he g

roup

doe

s no

t m

onito

r ass

ets

and

liabi

litie

s of

the

segm

ents

.

F-82

245496 Olive pp138-imp 27/06/2017 09:22 Page 82

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

175

AN

NU

AL R

EPO

RT 2

016

|

Gro

up in

form

atio

n ab

out o

pera

ting

segm

ents

in 2

016

is pr

ovid

ed b

elow

:

2016

Su

pp

ly a

nd

dis

trib

uti

on

of

ele

ctr

icit

y,

gas d

istr

ibu

tio

n

Ele

ctr

icit

y

gen

era

tio

n

Ele

ctr

icit

y a

nd

gas

trad

e

Oth

er

seg

men

ts

Elim

inatio

n o

f in

terc

om

pan

y tra

nsacti

on

s

an

d c

on

so

lid

atio

n

elim

inatio

ns

To

tal

Pare

nt

Co

mp

an

y

Oth

er

seg

men

ts

Reve

nue

from

ext

erna

l cus

tom

ers

599,

137

161,

362

352,

141

- 25

,265

(3

6,27

5)

1,10

1,63

0 Re

venu

e fro

m o

ther

seg

men

ts

50,9

26

19,8

63

36,8

50

71,3

29

56,9

38

(235

,906

) -

To

tal re

ve

nu

e

650,0

63

181,2

25

388,9

91

71,3

29

82,2

03

(272,1

81)

1,1

01,6

30

Expe

nses

(5

42,0

77)

(127

,873

) (3

79,8

85)

11,5

21

(85,

181)

16

9,21

6 (9

54,2

79)

Ther

eof:

depr

ecia

tion

and

amor

tizat

ion

(46,

028)

(2

3,48

8)

(1,1

00)

(3)

(8,2

01)

302

(78,

518)

Th

ereo

f: im

pairm

ents

and

writ

e-of

fs

(9,1

29)

(3,8

53)

(144

) 16

,688

14

2 (1

5,38

6)

(11,

682)

Th

ereo

f: un

real

ized

gain

(lo

ss)

on

reva

luat

ion

of d

eriva

tives

-

- 2,

036

- -

- 2,

036

Man

agem

ent a

djus

tmen

ts*

- -

19,0

00

- -

- 19

,000

E

BIT

DA

163,1

43

80,6

93

27,3

14

66,1

65

5,0

81

(87,8

81)

254,5

15

Op

era

tin

g p

rofi

t (l

oss)

107,9

86

53,3

52

9,1

06

82,8

50

(2,9

78)

(102,9

65)

147,3

51

Inte

rest

inco

me

176

208

151

3,87

1 9

(1,5

57)

2,85

8 In

tere

st (e

xpen

ses)

(1

,739

) (3

,201

) (1

,295

) (7

32)

(353

) 1,

560

(5,7

60)

Oth

er fi

nanc

ial in

com

e (e

xpen

ses)

1,

002

356

34

9,15

5 (2

10)

(10,

571)

(2

34)

Pro

fit

(lo

ss)

befo

re in

co

me t

ax

107,4

25

50,7

15

7,9

96

95,1

44

(3,5

32)

(113,5

33)

144,2

15

Inco

me

tax

(14,

923)

(8

,446

) (5

,209

) 11

(4

52)

3,24

2 (2

5,77

7)

Net

pro

fit

(lo

ss)

92,5

02

42,2

69

2,7

87

95,1

55

(3,9

84)

(110,2

91)

118,4

38

To

tal assets

1,1

13,1

86

886,1

18

150,8

14

1,3

98,3

61

188,8

64

(1,3

05,1

91)

2,4

32,1

52

*Man

agem

ent a

djus

tmen

ts a

pplie

d wh

ile a

rrivin

g at

EBI

TDA

are

rela

ted

to G

azpr

om g

as p

rice

redu

ctio

n an

d ex

cess

ive p

rofit

s fro

m re

gula

ted

activ

ities

reco

gnitio

n (E

lect

ricity

and

gas

trad

e se

gmen

t).

F-83

245496 Olive pp138-imp 27/06/2017 09:22 Page 83

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

176

AN

NU

AL R

EPO

RT 2

016

|

Gro

up in

form

atio

n ab

out o

pera

ting

segm

ents

in 2

015

is pr

ovid

ed b

elow

:

2015

Su

pp

ly a

nd

dis

trib

uti

on

of

ele

ctr

icit

y,

gas d

istr

ibu

tio

n

Ele

ctr

icit

y

gen

era

tio

n

Ele

ctr

icit

y a

nd

gas

trad

e

Oth

er

seg

men

ts

Elim

inati

on

of

inte

rco

mp

an

y tra

nsacti

on

s

an

d c

on

so

lid

atio

n

elim

inati

on

s

To

tal

Pare

nt

Co

mp

an

y

Oth

er

seg

men

ts

Reve

nue

from

ext

erna

l cus

tom

ers

595,

447

143,

271

375,

658

(4)

40,0

98

(58,

704)

1,

095,

766

Reve

nue

from

oth

er s

egm

ents

42

,778

71

,124

13

8,07

1 95

,823

61

,640

(4

09,4

36)

- T

ota

l re

ve

nu

e

638,2

25

214,3

95

513,7

29

95,8

19

101,7

38

(468,1

40)

1,0

95,7

66

Expe

nses

(5

36,1

67)

(208

,634

) (5

40,4

34)

11,7

07

(103

,379

) 34

6,23

4 (1

,030

,673

) Th

ereo

f: de

prec

iatio

n an

d am

ortiz

atio

n (4

3,84

8)

(22,

443)

(1

09)

(3)

(8,1

07)

273

(74,

237)

Th

ereo

f: im

pairm

ents

and

writ

e-of

fs

(3,4

73)

(29,

956)

34

5 16

,216

1,

491

(15,

010)

(3

0,38

7)

Ther

eof:

unre

alize

d ga

in

(loss

) on

re

valu

atio

n of

der

ivativ

es

- -

- -

- -

- M

anag

emen

t adj

ustm

ents

* -

- 46

,000

-

- -

46,0

00

EB

ITD

A

149,3

79

58,1

60

19,0

59

91,3

13

4,9

75

(107,1

69)

215,7

17

Op

era

tin

g p

rofi

t (l

oss)

102,0

58

5,7

61

(26,7

05)

107,5

26

(1,6

41)

(121,9

06)

65,0

93

Inte

rest

inco

me

268

193

281

6,06

0 14

(1

,859

) 4,

957

Inte

rest

(exp

ense

s)

(2,0

49)

(1,9

84)

(2,2

85)

(419

) (1

62)

2,44

3 (4

,456

) O

ther

fina

ncia

l inco

me

(exp

ense

s)

295

(81)

21

3 (1

,902

) 16

41

(1

,417

) P

rofi

t (l

oss)

befo

re in

co

me t

ax

100,5

72

3,8

89

(28,4

96)

111,2

65

(1,7

73)

(121,2

81)

64,1

77

Inco

me

tax

(15,

090)

(4

,120

) 64

8 (2

48)

194

9,73

6 (8

,880

) N

et

pro

fit

(lo

ss)

85,4

82

(231)

(27,8

48)

111,0

17

(1,5

79)

(111,5

45)

55,2

97

To

tal assets

1,0

78,8

00

833,4

74

165,4

19

1,3

64,1

80

160,4

29

(1,2

63,0

72)

2,3

39,2

30

*Man

agem

ent a

djus

tmen

ts a

pplie

d wh

ile a

rrivin

g at

EBI

TDA

are

rela

ted

to G

azpr

om g

as p

rice

redu

ctio

n an

d ex

cess

ive p

rofit

s fro

m re

gula

ted

activ

ities

reco

gnitio

n (E

lect

ricity

and

gas

trad

e se

gmen

t).

F-84

245496 Olive pp138-imp 27/06/2017 09:22 Page 84

NO

TE

S T

O T

HE

FIN

AN

CIA

L S

TA

TE

ME

NT

S

Fo

r th

e y

ea

r e

nd

ed

31

De

cem

be

r 2

01

6

All a

mou

nts

in E

UR

thou

sand

s un

less

oth

erw

ise

stat

ed

177

AN

NU

AL R

EPO

RT 2

016

|

39 E

vent

s af

ter t

he re

porti

ng p

erio

d In

crea

se o

f the

aut

horis

ed s

hare

cap

ital o

f Viln

iaus

Kog

ener

acin

ė Jė

gain

ė U

AB

O

n 19

Jan

uary

201

7, a

new

ver

sion

of t

he A

rticl

es o

f Ass

ocia

tion

of V

ilnia

us K

ogen

erac

inė

Jėga

inė

UAB

rel

ated

to

the

incr

ease

in a

utho

rised

sha

re c

apita

l up

to E

UR

20,

000

thou

sand

by

issui

ng

68,9

65,5

18 n

ew re

gist

ered

sha

res

with

the

nom

inal

val

ue o

f EU

R 0

.29

per s

hare

was

regi

ster

ed w

ith

the

Reg

ister

of L

egal

Ent

ities.

Ba

nk b

orro

win

g O

n 27

Jan

uary

201

7, th

e C

ompa

ny’s

sub

sidi

ary

Ener

gijo

s Sk

irsty

mo

Ope

rato

rius

AB a

nd S

EB B

anka

s AB

sig

ned

the

agre

emen

t for

a lo

ng-te

rm lo

an o

f EU

R 7

7 m

illion

. The

loan

will

be u

sed

to re

finan

ce

finan

cial

liab

ilitie

s of

Ene

rgijo

s Sk

irsty

mo

Ope

rato

rius

AB a

nd fi

nanc

e its

wor

king

cap

ital.

The

loan

re

paym

ent t

erm

is 1

0 ye

ars

and

it is

subj

ect t

o a

varia

ble

inte

rest

rate

of 3

mon

ths

EUR

IBO

R.

App

eal i

n re

spec

t of t

he N

CC

’s R

esol

utio

n

On

9 Ja

nuar

y 20

17, V

ilniu

s R

egio

nal A

dmin

istra

tive

Cou

rt ac

cept

ed th

e ap

peal

of L

ietu

vos

Ener

gijo

s G

amyb

a AB

, whe

reby

it r

eque

sted

to r

epea

l par

agra

ph 1

of t

he N

CC

’s R

esol

utio

n N

o. 0

3-39

1 of

29

Nov

embe

r 201

6 O

n de

term

inin

g ca

p pr

ices

for c

apac

ity re

serv

e se

rvice

s of L

ietu

vos E

nerg

ijos G

amyb

a AB

for t

he y

ear 2

017.

Bas

ed o

n pa

ragr

aph

1 of

the

Res

olut

ion,

app

licat

ion

of a

pro

porti

onat

e co

st

allo

catio

n ap

proa

ch to

ele

ctric

ity c

osts

of K

ruon

is PS

HP

that

are

attr

ibut

ed t

o se

cond

ary

capa

city

re

serv

e se

rvic

es f

or t

he y

ear

2017

is u

ngro

unde

d an

d do

es n

ot t

ake

into

acc

ount

the

tec

hnica

l ch

arac

teris

tics

of t

he p

lant

, si

nce

when

ass

urin

g se

cond

ary

emer

genc

y ac

tive

capa

city

rese

rve

serv

ices

, two

uni

ts o

f Kru

onis

PSH

P ar

e us

ed (w

ith to

tal c

apac

ity o

f 450

MW

), wh

erea

s th

e co

sts

of

Liet

uvos

Ene

rgijo

s G

amyb

a AB

are

com

pens

ated

onl

y in

resp

ect o

f 400

MW

cap

acity

. In

the

opin

ion

of L

ietu

vos

Ener

gijo

s G

amyb

a AB

, the

abo

ve-m

entio

ned

para

grap

h 1

of t

he N

CC

’s R

esol

utio

n is

un

grou

nded

. G

uara

ntee

s iss

ued

On

18 J

anua

ry 2

017,

the

Com

pany

and

SEB

PA

NK

AS,

whi

ch r

epre

sent

s th

e cr

edito

rs’ c

onso

rtium

co

nsist

ing

of S

EB P

ANK

AS a

nd N

orde

a Ba

nk A

B Es

toni

a Br

anch

, sig

ned

the

guar

ante

e ag

reem

ent,

unde

r whi

ch th

e fu

lfilm

ent o

f obl

igat

ions

of T

uule

ener

gia

OU

ass

umed

by

the

cred

it ag

reem

ent s

igne

d wi

th th

e co

nsor

tium

was

secu

red.

As

at 3

1 D

ecem

ber 2

016,

liabi

lities

of T

uule

ener

gia

OU

, the

fulfil

men

t of

whi

ch is

sec

ured

by

the

guar

ante

e iss

ued

by th

e C

ompa

ny, a

mou

nted

to E

UR

18,

842

thou

sand

. Ea

rly re

paym

ent

On

1 M

arch

201

7 th

e C

ompa

ny re

ceive

d EU

R 4

,300

thou

sand

ear

ly re

paym

ent f

rom

EPS

O-G

UAB

wh

ich

paid

for L

itgrid

AB

shar

es (N

otes

4,9

,13)

. Lo

ans

prov

ided

O

n 25

Jan

uary

201

7 th

e C

ompa

ny p

rovid

ed E

UR

4,0

00 th

ousa

nd lo

an to

its

subs

idia

ry E

nerg

etiko

s pa

slau

gų i

r ra

ngos

org

aniza

cija

UAB

to

refin

ance

its

cur

rent

deb

ts.

Loan

is

sche

dule

d fo

r fin

al

repa

ymen

t at 3

1 D

ecem

ber 2

019.

O

n 13

Feb

ruar

y 20

17 th

e C

ompa

ny h

as p

rolo

nged

the

EUR

4,9

27 th

ousa

nd lo

an to

its

subs

idia

ry

Tuul

eene

rgia

OU

. Loa

n is

sche

dule

d fo

r fin

al re

paym

ent a

t 13

Febr

uary

202

8.

Dis

tribu

tion

of d

ivide

nds

The

ordi

nary

gen

eral

mee

ting

of s

hare

hold

ers

of A

B „E

nerg

ijos

skirs

tym

o op

erat

oriu

s“ w

as h

eld

on 2

4 M

arch

201

7 wh

ere

it wa

s de

cide

d to

app

rove

the

prof

it ap

prop

riatio

n fo

r 201

6 an

d to

allo

cate

EUR

0,

0578

6 pe

r sha

re in

divi

dend

s, in

tota

l EU

R 5

1,76

5 th

ousa

nd in

div

iden

ds.

The

ordi

nary

gen

eral

mee

ting

of s

hare

hold

ers

of „

Liet

uvos

ene

rgijo

s ga

myb

a“,

AB w

as h

eld

on 2

4 M

arch

201

7 wh

ere

it wa

s de

cide

d to

app

rove

the

prof

it ap

prop

riatio

n fo

r 201

6 an

d to

allo

cate

EUR

0,

02 p

er s

hare

in d

ivide

nds,

in to

tal E

UR

12,

702

thou

sand

in d

ivide

nds.

Bo

nds

plac

emen

t pla

ns

At 1

Mar

ch 2

017

the

Gro

up a

nnou

nced

a p

lan

to is

sue

EUR

200

,000

tho

usan

d bo

nds

emiss

ion.

O

btai

ned

fund

s wi

ll be

utili

zed

in d

evel

opm

ent o

f gre

en e

nerg

y pr

ojec

ts. C

urre

ntly

, the

re is

laun

ched

sc

reen

ing

of b

onds

’ dist

ribut

or, w

ho w

ill be

resp

onsi

ble

for p

lann

ing

of p

lace

men

t and

dist

ribut

ion

of

bond

em

issi

on. I

t is

plan

ned

that

the

first

pla

cem

ent o

f bon

ds, u

nder

favo

rabl

e m

arke

t con

ditio

ns, w

ill ta

ke p

lace

in 2

017.

**

***

F-85

245496 Olive pp138-imp 27/06/2017 09:22 Page 85

PricewaterhouseCoopersUAB,J.Jasinskiog.16B,LT-o3163Vilnius,Lithuania

T:+370(5)2392300,F:+370(5)2392301,Email:vilnius@lt.pwc.com,www.pwc.com/lt

Pric

ewat

erho

useC

oope

rsU

AB,c

ompa

nyco

de11

1473

315,

isa

priv

ate

com

pany

regi

ster

edwi

thth

eLi

thua

nian

Reg

iste

rofL

egal

Entit

ies

Thisversionofourreportisatranslationfromtheoriginal,whichwaspreparedinLithuanianlanguage.Allpossiblecarehasbeentakentoensurethatthetranslation

isanaccuraterepresentationoftheoriginal.However,inallmattersofinterpretationofinformation,viewsoropinions,theoriginallanguageversionofourreport

takesprecedenceoverthistranslation.

IndependentAuditor’sReport

TotheshareholderofLietuvosEnergijaUAB

Reportonthefinancialstatements

Wehaveauditedtheaccompanyingstand-aloneandconsolidatedfinancialstatementsofLietuvosEnergijaUAB(“theCompany”)anditssubsidiaries

(“theGroup”)setoutonpages73to135,whichcomprisethestand-aloneandconsolidatedstatementsoffinancialpositionasof31December2015and

thestand-aloneandconsolidatedstatementsofprofitorlossandothercomprehensiveincome,changesinequityandcashflowsfortheyearthenended,

andnotescomprisingasummaryofsignificantaccountingpoliciesandotherexplanatoryinformation(“thefinancialstatements”).

Management’sresponsibilityforthefinancialstatements

ManagementisresponsibleforthepreparationandfairpresentationofthesefinancialstatementsinaccordancewithInternationalFinancialReporting

StandardsasadoptedbytheEuropeanUnion,andforsuchinternalcontrolasmanagementdeterminesisnecessarytoenablethepreparationoffinancial

statementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Auditor’sresponsibility

Ourresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudit.WeconductedourauditinaccordancewithInternational

StandardsonAuditing.Thosestandardsrequirethatwecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassurance

aboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.Theproceduresselected

dependontheauditor’sjudgment,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudor

error.Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheentity’spreparationandfairpresentationofthefinancial

statementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopiniononthe

effectivenessoftheentity’sinternalcontrol.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessof

accountingestimatesmadebymanagement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourqualifiedauditopinion.

F-86

245496 Olive pp138-imp 27/06/2017 09:22 Page 86

Basisforqualifiedopinion

AccordingtotheGroup’saccountingpolicy,property,plantandequipment(exceptforthePowerPlants,distributionnetworksandrelatedinstallations,

gastechnologicalequipmentandconstructions,informationtechnologyandtelecommunicationequipment)arecarriedatrevaluedamounts,beingtheir

fairvaluesasofthedateofrevaluationlesssubsequentaccumulateddepreciationandimpairmentlosses.Asexplainedinnote4,Group’smanagement

hasassessedthefairvaluesofpropertyplantandequipmentasof31December2014andaccountedfortherelatedrevaluation.Themanagementdidnot

determinethefairvaluesofproperty,plantandequipmentwithcarryingamountofEUR1,303millionasof31December2013,althoughimpairment

indicatorsexistedasofthatdate.Consequently,wewereunabletoassessinwhichperiodtherevaluationresultsshouldhavebeenrecognised,andby

whichamountthedepreciationexpenseofthecomparativeperiodpresentedinthesefinancialstatementsshouldhavebeenadjusted.Ourauditopinions

onthefinancialstatementsfortheyearsended31December2014and2013weremodifiedaccordingly.Ouropiniononthecurrentperiod’sfinancial

statementsisthereforemodifiedbecauseoftheeffectofthismatteronthecomparabilityofthecurrentperiod'sfiguresandthecorrespondingfigures.

Asof31December2014,theGroup’smanagementassessedtherecoverableamountofgoodwillandrecognisedanimpairmentloss.Themanagementdid

notdeterminetherecoverableamountofgoodwillwithcarryingamountofEUR51.6millionasof31December2013,althoughimpairmentindicators

existedasofthatdate.Consequently,wewereunabletoassessinwhichperiodtheimpairmentlossshouldhavebeenrecognised,andbywhichamount

thegoodwillimpairmentlossofthecomparativeperiodpresentedinthesefinancialstatementsshouldhavebeenadjusted.Ourauditopinionsonthe

financialstatementsfortheyearsended31December2014and2013weremodifiedaccordingly.Ouropiniononthecurrentperiod’sfinancialstatements

isthereforemodifiedbecauseoftheeffectofthismatteronthecomparabilityofthecurrentperiod'sfiguresandthecorrespondingfigures.

TheCompanyaccountsforitsinvestmentsinsubsidiariesatcostlessimpairmentlosses.Asof31December2014,theCompany’smanagementassessed

therecoverableamountofinvestmentsinsubsidiariesandrecognisedanimpairmentloss.Themanagementdidnotdeterminetherecoverableamountof

investmentswillwithcarryingamountofEUR504.7millionasof31December2013,althoughimpairmentindicatorsexistedasofthatdate.

Consequently,wewereunabletoassessinwhichperiodtheimpairmentlossshouldhavebeenrecognised,andbywhichamounttheimpairmentlossof

thecomparativeperiodpresentedinthesefinancialstatementsshouldhavebeenadjusted.Ourauditopinionsonthefinancialstatementsfortheyears

ended31December2014and2013weremodifiedaccordingly.Ouropiniononthecurrentperiod’sfinancialstatementsisthereforemodifiedbecauseof

theeffectofthismatteronthecomparabilityofthecurrentperiod'sfiguresandthecorrespondingfigures.

F-87

245496 Olive pp138-imp 27/06/2017 09:22 Page 87

Qualifiedopinion

Inouropinion,exceptfortheeffectsofthemattersreferredtoinBasisforqualifiedopinionparagraph,thefinancialstatementspresentfairly,inall

materialrespects,thefinancialpositionoftheCompanyandtheGroupasof31December2015,andtheirfinancialperformanceandtheircashflowsfor

theyearthenendedinaccordancewithInternationalFinancialReportingStandardsasadoptedbytheEuropeanUnion.

Reportonotherlegalandregulatoryrequirements

Furthermore,wehavereadtheconsolidatedannualreportfortheyearended31December2015setoutonpages3to68andhavenotnotedanymaterial

inconsistenciesbetweenthefinancialinformationincludedinitandtheauditedfinancialstatementsfortheyearended31December2015.

OnbehalfofPricewaterhouseCoopersUAB

Partner

Auditor'sCertificateNo.000457

Vilnius,RepublicofLithuania

7April2016

F-88

245496 Olive pp138-imp 27/06/2017 09:22 Page 88

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533)

--

Oth

er

co

mp

reh

en

siv

ein

co

me

(lo

ss)

Item

sth

at

will

no

tb

ere

cla

ssif

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su

bseq

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tly

top

rofi

to

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Gai

n(lo

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1,08

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--

Item

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at

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no

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ssif

ied

su

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tly

top

rofi

to

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ss,to

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0(1

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93)

--

Item

sth

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will

be

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ssif

ied

su

bseq

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tly

top

rofi

to

rlo

ss

Chan

gein

fair

valu

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avai

labl

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r-sal

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Item

sth

at

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be

recla

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su

bseq

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tly

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rofi

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tal

(26)

74(2

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Oth

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mp

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To

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the

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Attri

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to:

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s6,

094

(27,

808)

--

F-92

245496 Olive pp138-imp 27/06/2017 09:22 Page 92

76AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Ge

neralinformation

No

tes

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mp

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c201

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justm

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rn

on

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en

ses

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co

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dam

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atio

n6,

786

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880

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Impa

irmen

tofg

oodw

ill6

-51

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irmen

tofi

ntan

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and

prop

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ntan

deq

uipm

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7, 2130

,133

--

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pairm

ento

ffin

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alas

sets

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89)

--

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nof

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1,40

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--

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tofi

nves

tmen

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asso

ciat

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ever

sal)

30-

-(1

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eof

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fit)o

fass

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tve

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--

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n)lo

sson

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osal

ofin

vest

men

tsin

subs

idia

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and

asso

ciat

es(2

1)-

--

Inco

me

tax

expe

nse

(ben

efit)

348,

880

(53,

571)

248

135

(Dep

reci

atio

n)of

gran

ts21

(12,

202)

(11,

963)

--

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ease

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reas

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prov

isio

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vent

ory

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ain)

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3,71

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--

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nex

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issi

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--

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su

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ves

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gac

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com

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(4,9

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93)

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nses

324,

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6O

ther

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ce(in

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47)

Ch

an

ges

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pit

al:

Incr

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reas

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les

and

othe

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ount

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0,70

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2)(In

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ase

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men

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ntas

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)-

Incr

ease

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amou

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me

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adva

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aid)

(12,

624)

(14,

142)

--

Net

ca

sh

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se

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125

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inves

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gac

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(Acq

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tion)

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oper

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and

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tand

inta

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ndin

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asse

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61,

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ceiv

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spos

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125

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362

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145

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rest

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4,62

93,

893

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74,

205

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nge

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n-co

ntro

lling

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ctur

e(3

20)

--

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ends

rece

ived

35-

1,92

493

,825

141,

720

Acqu

isiti

onof

LEST

OAB

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areh

olde

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quis

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33-

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vesti

ng

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79

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56

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Proc

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cas

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16122

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31,3

47

F-93

245496 Olive pp138-imp 27/06/2017 09:22 Page 93

77AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Ge

neralinformation

Gro

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74-

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eta

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65,8

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tal

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17)

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-(1

56,5

43)

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19)

Netp

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74

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28)

(417,9

71)

(27,8

09)

(445,7

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Tran

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-1,

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--

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040

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--

--

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--

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to-

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-1,

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Oth

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chan

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--

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214

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68

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30

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1,06

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66

141,0

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tal

oth

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co

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en

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1,0

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49,2

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To

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1,0

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F-94

245496 Olive pp138-imp 27/06/2017 09:22 Page 94

78AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Ge

neralinformation

Co

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84,1

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32,6

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31

Decem

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6)-

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tal

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111,

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111,

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F-95

245496 Olive pp138-imp 27/06/2017 09:22 Page 95

79AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Ge

neralinformation

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F-96

245496 Olive pp138-imp 27/06/2017 09:22 Page 96

80AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Summaryof

significanta

ccou

ntingpo

licies

The

shar

ehol

ders

have

ast

atut

ory

right

toap

prov

eor

nott

oap

prov

eth

ese

finan

cial

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quire

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2.1

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sof

prep

arat

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Thes

efin

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tem

ents

have

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prep

ared

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cord

ance

with

and

com

ply

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Inte

rnat

iona

lFi

nanc

ialR

epor

ting

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s(IF

RS)a

sad

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pean

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on.

have

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prep

ared

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hist

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pmen

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sure

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issio

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tern

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inan

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ndin

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eIn

tern

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inan

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mitt

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)

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dam

endm

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ted

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rthe

first

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inth

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aren

ded

31D

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ber2

015:

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inte

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ncla

rifie

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coun

ting

fora

nob

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ya

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ome

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atio

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fact

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anen

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onom

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mpt

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reat

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esa

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inci

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tatio

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litie

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eim

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tofc

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basis

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arly

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cept

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reth

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orse

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ncia

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atar

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thin

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atIA

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and

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ness

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endm

ents

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amen

dmen

tsan

din

terp

reta

tions

that

beca

me

effe

ctiv

efo

rth

efin

ancia

lye

arbe

ginn

ing

on1

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ary

2015

were

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elev

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oth

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mpa

ny/G

roup

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din

terp

reta

tions

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are

noty

etef

fect

ive

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erne

wst

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amen

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din

terp

reta

tions

effe

ctive

fora

nnua

lper

iods

begi

nnin

gon

oraf

ter1

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ary

2016

that

have

notb

een

adop

ted

inpr

epar

ing

thes

efin

anci

alst

atem

ents

:

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anci

alin

stru

men

ts:C

lass

ificat

ion

and

mea

sure

men

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yfe

atur

esof

the

new

stan

dard

are:

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nanc

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sset

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ntly

atfa

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lue

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ugh

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som

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ided

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forc

lass

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and

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were

carri

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chan

ged

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ych

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atan

entit

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llbe

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liabi

lities

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gnat

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fair

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ofit

orlo

ssin

othe

rcom

preh

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com

e.-

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intro

duce

sa

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elfo

rthe

reco

gnitio

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irmen

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ses

the

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itqu

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anci

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sets

since

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F-97

245496 Olive pp138-imp 27/06/2017 09:22 Page 97

81AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Summaryof

significanta

ccou

ntingpo

licies

This

stan

dard

isef

fect

ivefo

rann

ualp

erio

dsbe

ginn

ing

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emen

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eim

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tofc

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--b

ased

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entt

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actio

nsfo

rwhi

chth

egr

antd

ate

ison

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ter1

July

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.-

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nwh

ich

mee

tsth

ede

finitio

nof

afin

anci

alin

stru

men

tis

clas

sifie

das

afin

ancia

lliab

ility

oras

equi

ty,

onth

eba

sisof

the

defin

itions

inIA

S32

,and

(2)a

llnon

-equ

ityco

ntin

gent

cons

ider

atio

n,bo

thfin

anci

alan

dno

n-fin

anci

al,i

sm

easu

red

atfa

irva

lue

atea

chre

porti

ngda

te,w

ithch

ange

sin

fair

valu

ere

cogn

ised

inpr

ofit

and

loss

.Am

endm

ents

toIF

RS

3ar

eef

fect

ive

forb

usin

ess

com

bina

tions

wher

eth

eac

quisi

tion

date

ison

oraf

ter1

July

2014

.-

IFR

S8

was

amen

ded

tore

quire

(1)d

isclo

sure

ofth

eju

dgem

ents

mad

eby

man

agem

enti

nag

greg

atin

gop

erat

ing

segm

ents

,inc

ludi

nga

desc

riptio

nof

the

segm

ents

whic

hha

vebe

enag

greg

ated

and

the

econ

omic

indi

cato

rswh

ich

have

been

asse

ssed

inde

term

inin

gth

atth

eag

greg

ated

segm

ents

shar

esim

ilar

econ

omic

char

acte

ristic

s,an

d(2

)a

reco

ncilia

tion

of

-Th

eba

sis

for

conc

lusi

ons

onIF

RS

13wa

sam

ende

dto

clarif

yth

atde

letio

nof

certa

inpa

ragr

aphs

inIA

S39

upon

publ

ishin

gof

IFR

S13

was

notm

ade

with

anin

tent

ion

tore

mov

eth

eab

ility

tom

easu

resh

ort-t

erm

rece

ivabl

esan

dpa

yabl

esat

invo

iceam

ount

wher

eth

eim

pact

ofdi

scou

ntin

gis

imm

ater

ial.

-IA

S16

and

IAS

38we

ream

ende

dto

clarif

yho

wth

egr

oss

carry

ing

amou

ntan

dth

eac

cum

ulat

edde

prec

iatio

nar

etre

ated

wher

ean

entit

yus

esth

ere

valu

atio

nm

odel

.-

IAS

24wa

sam

ende

dto

inclu

de,a

sa

rela

ted

party

,an

entit

yth

atpr

ovid

eske

ym

anag

emen

t

eth

eam

ount

sch

arge

dto

the

repo

rting

entit

yby

the

man

agem

ente

ntity

fors

ervi

ces

prov

ided

.Th

ese

impr

ovem

ents

are

effe

ctive

for

annu

alpe

riods

begi

nnin

gon

oraf

ter

1Fe

brua

ry20

15.T

heC

ompa

ny/G

roup

iscu

rrent

lyas

sess

ing

the

impa

ctof

thes

eam

endm

ents

onits

finan

cial

stat

emen

ts.

IFR

S15

,'R

even

uefro

mco

ntra

cts

with

cust

omer

s'Th

ene

wst

anda

rdin

trodu

ces

the

core

prin

ciple

that

reve

nue

mus

tbe

reco

gnise

dwh

enth

ego

ods

orse

rvic

esar

etra

nsfe

rred

toth

ecu

stom

er,a

tthe

trans

actio

npr

ice.

Any

bund

led

good

sor

serv

ices

that

are

dist

inct

mus

tbe

sepa

rate

lyre

cogn

ised,

and

any

disc

ount

sor

reba

tes

onth

eco

ntra

ctpr

icem

ust

gene

rally

beal

loca

ted

toth

ese

para

teel

emen

ts.

Whe

nth

eco

nsid

erat

ion

varie

sfo

ran

yre

ason

,m

inim

umam

ount

sm

ustb

ere

cogn

ised

ifth

eyar

eno

tats

igni

fican

tris

kof

reve

rsal

.Co

sts

incu

rred

tose

cure

cont

ract

swi

thcu

stom

ers

have

tobe

capi

talis

edan

dam

ortis

edov

erth

epe

riod

when

the

bene

fits

ofth

eco

ntra

ctar

eco

nsum

ed.

The

stan

dard

isef

fect

ive

fora

nnua

lper

iods

begi

nnin

gon

oraf

ter1

Janu

ary

2018

;not

yete

ndor

sed

byth

eEU

.The

Com

pany

/Gro

upis

curre

ntly

asse

ssin

gth

eim

pact

ofth

isst

anda

rdon

itsfin

anci

alst

atem

ents

.

Annu

alim

prov

emen

tsto

2014

IFRS

sTh

eam

endm

ents

impa

ct4

stan

dard

s.-

IFR

S5

was

amen

ded

tocl

arify

that

chan

gein

the

man

nero

fdisp

osal

(recl

assi

ficat

ion

from

"hel

dfo

rsal

e"to

"hel

dfo

rdist

ribut

ion"

orvic

eve

rsa)

does

notc

onst

itute

ach

ange

toa

plan

ofsa

leor

dist

ribut

ion,

and

does

noth

ave

tobe

acco

unte

dfo

ras

such

.-

The

amen

dmen

tto

IFRS

7ad

dsgu

idan

ceto

help

man

agem

entd

eter

min

ewh

ethe

rthe

term

sof

anar

rang

emen

tto

serv

icea

finan

cial

asse

twh

ich

has

been

trans

ferre

dco

nstit

ute

cont

inui

ngin

volv

emen

t,fo

rth

epu

rpos

esof

disc

losu

res

requ

ired

byIF

RS

7.Th

eam

endm

ent

also

clar

ifies

that

the

offs

ettin

gdi

sclo

sure

sof

IFR

S7

are

not

spec

ifical

lyre

quire

dfo

rall

inte

rimpe

riods

,unl

ess

requ

ired

byIA

S34

.-

The

amen

dmen

tto

IAS

19cl

arifie

sth

atfo

rpo

st-e

mpl

oym

ent

bene

fitob

ligat

ions

,th

ede

cisio

nsre

gard

ing

disc

ount

rate

,exis

tenc

eof

deep

mar

keti

nhi

gh-q

ualit

ycor

pora

tebo

nds,

orwh

ich

gove

rnm

entb

onds

tous

eas

aba

sis,s

houl

dbe

base

don

the

curre

ncy

that

the

liabi

litie

sar

ede

nom

inat

edin

,and

nott

heco

untry

wher

eth

eyar

ise.

-IA

S34

will

requ

irea

cros

sre

fere

nce

from

the

inte

rimfin

anci

alst

atem

ents

toth

elo

catio

nof

"info

rmat

ion

disc

lose

del

sewh

ere

inth

ein

terim

finan

cial

repo

rt".

Thes

eim

prov

emen

tsar

eef

fect

ivefo

ran

nual

perio

dsbe

ginn

ing

onor

afte

r01

Janu

ary

2016

.The

Com

pany

/Gro

upis

curre

ntly

asse

ssin

gth

eim

pact

ofth

ese

amen

dmen

tson

itsfin

anci

alst

atem

ents

.

Dis

clos

ure

initi

ativ

eAm

endm

ents

toIA

S1

The

Stan

dard

was

amen

ded

tocla

rify

the

conc

epto

fmat

eria

lityan

dex

plai

nsth

atan

entit

yne

edno

tpr

ovid

ea

spec

ificdi

sclo

sure

requ

ired

byan

IFR

Sif

the

info

rmat

ion

resu

lting

from

that

disc

losu

reis

not

mat

eria

l,ev

enif

the

IFR

Sco

ntai

nsa

listo

fspe

cific

requ

irem

ents

orde

scrib

esth

emas

min

imum

requ

irem

ents

.Th

eSt

anda

rdal

sopr

ovid

esne

wgu

idan

ceon

subt

otal

sin

finan

cial

stat

emen

ts,

inpa

rticu

lar,

such

subt

otal

s(a

)sho

uld

beco

mpr

ised

oflin

eite

ms

mad

eup

ofam

ount

sre

cogn

ised

and

mea

sure

din

acco

rdan

cewi

thIF

RS;(

b)be

pres

ente

dan

dla

belle

din

am

anne

rtha

tmak

esth

elin

eite

ms

that

cons

titut

eth

esu

btot

alcl

eara

ndun

ders

tand

able

;(c)

beco

nsist

entf

rom

perio

dto

perio

d;an

d(d

)no

tbe

disp

laye

dwi

thm

ore

prom

inen

ceth

anth

esu

btot

als

and

tota

lsre

quire

dby

IFRS

stan

dard

s.Th

ese

amen

dmen

tsar

eef

fect

ivefo

ran

nual

perio

dsbe

ginn

ing

onor

afte

r1

Janu

ary

2016

.Th

eC

ompa

ny/G

roup

iscu

rrent

lyas

sess

ing

the

impa

ctof

thes

eam

endm

ents

onits

finan

cial

stat

emen

ts.

The

new

stan

dard

sets

out

the

prin

cipl

esfo

rth

ere

cogn

ition

,m

easu

rem

ent,

pres

enta

tion

and

disc

losu

reof

leas

es.

Alll

ease

sre

sult

inth

ele

ssee

obta

inin

gth

erig

htto

use

anas

seta

tthe

star

tof

the

leas

ean

d,if

leas

epa

ymen

tsar

em

ade

over

time,

also

obta

inin

gfin

anci

ng.

Acco

rdin

gly,

IFR

S16

elim

inat

esth

ecla

ssific

atio

nof

leas

esas

eith

erop

erat

ing

leas

esor

finan

cele

ases

asis

requ

ired

byIA

S17

and,

inst

ead,

intro

duce

sa

sing

lele

ssee

acco

untin

gm

odel

.Le

ssee

swi

llbe

requ

ired

tore

cogn

ise:

(a)

asse

tsan

dlia

biliti

esfo

ral

llea

ses

with

ate

rmof

mor

eth

an12

mon

ths,

unle

ssth

eun

derly

ing

asse

tis

oflo

wva

lue;

and

(b)d

epre

ciat

ion

ofle

ase

asse

tsse

para

tely

from

inte

rest

onle

ase

liabi

litie

sin

the

inco

me

stat

emen

t.IF

RS16

subs

tant

ially

carri

esfo

rwar

dth

ele

ssor

acco

untin

gre

quire

men

tsin

IAS

17.A

ccor

ding

ly,a

less

orco

ntin

ues

tocl

assif

yits

leas

esas

oper

atin

gle

ases

orfin

ance

leas

es,a

ndto

acco

untf

orth

ose

two

type

sof

leas

esdi

ffere

ntly.

This

stan

dard

isef

fect

ivefo

rann

ualp

erio

dsbe

ginn

ing

onor

afte

r1Ja

nuar

y20

19;n

otye

tend

orse

dby

the

EU.T

heC

ompa

ny/G

roup

iscu

rrent

lyas

sess

ing

the

impa

ctof

the

new

stan

dard

onits

finan

cial

stat

emen

ts.

Oth

erst

anda

rds

and

amen

dmen

tsth

atha

vebe

enpu

blish

edbu

tnot

yete

ffect

ivear

eex

pect

edno

tto

have

sign

ifican

tim

pact

onth

eG

roup

/Com

pany

.

F-98

245496 Olive pp138-imp 27/06/2017 09:22 Page 98

82AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Summaryof

significanta

ccou

ntingpo

licies

2.2

Con

solid

atio

n

Con

solid

atio

nTh

eco

nsol

idat

edfin

anci

alst

atem

ents

ofth

eG

roup

incl

ude

the

finan

cial

stat

emen

tsof

the

pare

ntco

mpa

nyLi

etuv

osEn

ergi

jaU

ABan

dits

dire

ctly

and

indi

rect

lyco

ntro

lled

subs

idia

ries.

The

Gro

upco

ntro

lsan

entit

ywh

enth

eG

roup

isex

pose

dto

,orh

asrig

hts

to,v

aria

ble

retu

rns

from

itsin

volv

emen

twi

thth

een

tity

and

has

the

abilit

yto

affe

ctth

ose

retu

rns

thro

ugh

itspo

wero

vert

heen

tity.

Con

troli

sge

nera

llyob

tain

edby

hold

ing

mor

eth

anon

eha

lfof

the

votin

grig

hts.

Subs

idia

ries

are

fully

cons

olid

ated

from

the

date

onwh

ich

cont

rolis

trans

ferre

dto

the

Gro

up.T

hey

are

deco

nsol

idat

edfro

mth

eda

teth

atco

ntro

lcea

ses.

The

finan

cial

stat

emen

tsof

subs

idia

ries

have

been

prep

ared

usin

gun

iform

acco

untin

gpo

licie

san

dfo

rth

esa

me

repo

rting

perio

das

that

cove

red

byth

efin

anci

alst

atem

ents

ofth

epa

rent

com

pany

.On

cons

olid

atio

n,al

lin

ter-c

ompa

nytra

nsac

tions

,ba

lanc

esan

dun

real

ised

gain

san

d/or

loss

eson

trans

actio

nsam

ong

the

Gro

upco

mpa

nies

are

elim

inat

ed.

Non-

cont

rollin

gin

tere

stre

pres

ents

apa

rtof

prof

itor

loss

and

neta

sset

swh

ich

isno

tcon

trolle

dby

the

Gro

up.N

on-c

ontro

lling

inte

rest

isre

porte

dse

para

tely

inth

eco

nsol

idat

edst

atem

ento

fcom

preh

ensi

vein

com

e.Th

esh

are

ofeq

uity

attri

buta

ble

toth

eno

n-co

ntro

lling

inte

rest

and

toth

eow

ners

ofth

epa

rent

issh

own

sepa

rate

lyin

the

cons

olid

ated

bala

nce

shee

t.

Busi

ness

com

bina

tions

com

mon

cont

rol,

ther

efor

e,fo

rth

epu

rpos

eof

thes

efin

anci

alst

atem

ents

busi

ness

com

bina

tions

Acqu

isitio

nof

subs

idia

ries

whic

har

eno

tpar

toft

heC

ompa

ny's

grou

par

eac

coun

ted

foru

sing

the

acqu

isitio

nm

etho

d.Th

eco

stof

anac

quisi

tion

ism

easu

red

asth

efa

irva

lue

ofth

eas

sets

trans

ferre

d,th

eeq

uity

inte

rest

issue

dan

dlia

bilit

ies

incu

rred

oras

sum

edat

the

date

ofex

chan

ge.

Alla

cqui

sitio

n-re

late

dco

sts

are

expe

nsed

when

incu

rred.

The

acqu

iree'

sas

sets

acqu

ired,

liabi

lities

and

cont

inge

nt

are

reco

gnis

edat

thei

rfai

rval

ues

atth

eac

quisi

tion

date

.Th

eex

cess

ofth

eco

nsid

erat

ion

trans

ferre

d,th

eam

ount

ofan

yno

n-co

ntro

lling

inte

rest

inth

eac

quire

ean

dth

eac

quisi

tion-

date

fair

valu

eof

any

prev

ious

equi

tyin

tere

stin

the

acqu

iree

over

the

fair

valu

eof

the

iden

tifia

ble

neta

sset

sac

quire

dis

reco

rded

asgo

odwi

ll.If

the

tota

lofc

onsi

dera

tion

trans

ferre

d,no

n-co

ntro

lling

inte

rest

reco

gnis

edan

dpr

evio

usly

held

inte

rest

mea

sure

dis

less

than

the

fair

valu

eof

the

neta

sset

soft

hesu

bsid

iary

acqu

ired

inth

eca

seof

aba

rgai

npu

rcha

se,t

hedi

ffere

nce

isre

cogn

ised

dire

ctly

inth

ein

com

est

atem

ent.

Non-

cont

rollin

gin

tere

stin

the

acqu

iree

isin

itially

mea

sure

dat

the

non-

prop

ortio

nals

hare

ofth

efa

irva

lue

ofth

ene

tass

ets,

liabi

lities

and

cont

inge

ntlia

biliti

esre

cogn

ised.

Cha

nges

inow

ners

hip

inte

rest

ina

subs

idia

ryth

atdo

notr

esul

tin

chan

ges

inco

ntro

lTr

ansa

ctio

nswi

thno

n-co

ntro

lling

inte

rest

sth

atdo

notr

esul

tin

alo

ssof

cont

rola

repr

esen

ted

with

ineq

uity

,i.e

.as

trans

actio

nswi

theq

uity

owne

rs.

The

diffe

renc

ebe

twee

nth

efa

irva

lue

ofth

eco

nsid

erat

ion

paid

and

the

rele

vant

shar

eac

quire

dof

the

carry

ing

valu

eof

neta

sset

sof

the

subs

idia

ryis

reco

rded

aseq

uity

.G

ains

orlo

sses

ondi

spos

als

tono

n-co

ntro

lling

inte

rest

sar

eal

sore

cord

edin

equi

ty.

2.3

Inve

stm

ents

insu

bsid

iarie

s(C

ompa

ny)

Asu

bsid

iary

isan

entit

ydi

rect

lyor

indi

rect

lyco

bala

nce

shee

tin

vest

men

tsin

dire

ctly

cont

rolle

dsu

bsid

iarie

sar

est

ated

atac

quis

ition

cost

less

exce

eds

itses

timat

edre

cove

rabl

eam

ount

.

2.4

Inve

stm

ents

inas

soci

ates

and

join

tven

ture

sAn

asso

ciate

isan

entit

yove

rwhi

chth

eG

roup

/Com

pany

hass

igni

fican

tinf

luen

ce.S

igni

fican

tinflu

ence

isth

epo

wert

opa

rtici

pate

inth

efin

anci

alan

dop

erat

ing

polic

yde

cisi

ons

ofth

ein

vest

eebu

tis

not

cont

rolo

rjoi

ntco

ntro

love

rtho

sepo

licie

s.

shee

texc

eeds

itses

timat

edre

cove

rabl

eam

ount

.In

the

cons

olid

ated

finan

cial

stat

emen

tsof

the

Gro

upre

sults

ofop

erat

ions

,ass

ets

and

liabi

lities

ofas

soci

ates

are

acco

unte

dfo

rusi

ngan

equi

tym

etho

d,ex

cept

when

the

inve

stm

enti

scl

assif

ied

ashe

ld-fo

r--c

urre

ntas

sets

held

for

sale

and

cons

olid

ated

bala

nce

shee

tatc

osta

sad

just

edfo

rpos

t-acq

uisi

tion

chan

ges

the

neta

sset

sof

the

inve

stee

,les

san

yim

pairm

enti

nth

eva

lue

ofin

divi

dual

inve

stm

ents

.Los

ses

of

Gro

upha

din

curre

dle

galo

rind

irect

oblig

atio

nsor

mad

epa

ymen

tson

beha

lfof

the

asso

ciate

orjo

int

vent

ure.

liabi

litie

san

dco

ntin

gent

liabi

lities

ofth

eas

soci

ate

atth

eda

teof

acqu

isitio

nis

reco

gnise

das

deem

edgo

odwi

ll.Th

ego

odwi

llis

incl

uded

inth

ene

tbo

okam

ount

ofth

ein

vest

men

tand

isas

sess

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r

iden

tifia

ble

asse

ts,l

iabi

lities

and

cont

inge

ntlia

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erth

eco

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acqu

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n,af

terr

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essm

ent,

isre

cogn

ised

imm

edia

tely

inth

est

atem

ento

fcom

preh

ensi

vein

com

e.W

here

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Gro

upco

mpa

nyco

nduc

tstra

nsac

tions

with

anas

soci

ate

ofth

eG

roup

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ealis

edpr

ofits

orlo

sses

are

elim

inat

edto

.Fi

nanc

ial

guar

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ovid

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elia

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asso

ciat

esar

ein

itial

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cogn

ised

asan

inve

stm

enti

nas

socia

tes

ates

timat

edfa

irva

lue

and

asa

finan

ciall

iabi

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inth

eba

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esh

eet.

The

fair

valu

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estim

ated

asth

edi

ffere

nce

betw

een

the

fair

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eof

the

liabi

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atio

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mpa

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stan

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estim

a

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ajo

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ose

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inte

rest

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ure

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gth

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uity

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erth

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uity

met

hod,

the

valu

eof

the

F-99

245496 Olive pp138-imp 27/06/2017 09:22 Page 99

83AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Summaryof

significanta

ccou

ntingpo

licies

inve

stm

enti

na

join

tven

ture

wasm

easu

red

inth

est

atem

ento

ffin

ancia

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ition

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eco

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sted

resu

ltsof

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atio

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the

join

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ture

was

reco

gnise

din

the

inco

me

stat

emen

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eG

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are

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real

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gain

sor

loss

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ising

from

trans

actio

nsbe

twee

nth

eG

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and

the

join

tven

ture

owne

dby

it,we

reel

imin

ated

.

2.5

Fore

ign

curre

ncy

trans

latio

n(a

)Fun

ctio

nala

ndpr

esen

tatio

ncu

rrenc

yth

e

func

tiona

land

pres

enta

tion

curre

ncy

asfro

m1

Janu

ary

2015

.On

1Ja

nuar

y20

15,L

ithua

nia

beca

me

afu

ll-fle

dged

mem

bero

fthe

euro

zone

and

the

natio

nalc

urre

ncy

the

litas

was

repl

aced

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eeu

ro.

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euro

was

adop

ted

atex

chan

gera

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3.45

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rans

actio

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late

din

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usin

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ailin

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the

date

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orei

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ins

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min

ated

info

reig

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edin

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inco

me

stat

emen

t.

2.6

Prop

erty

,pla

nt,a

ndeq

uipm

ent

Prop

erty

,pla

ntan

deq

uipm

enti

sst

ated

atco

stor

reva

lued

amou

nt.P

rope

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lant

and

equi

pmen

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clud

ing

cate

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asse

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oPo

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ped

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rPla

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truct

ures

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mac

hine

ryof

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mal

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ombi

ned

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leU

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eser

vePo

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),ga

sdi

strib

utio

npi

pelin

es,g

aste

chno

logi

cale

quip

men

t,as

wella

sIT

and

tele

com

mun

icat

ion

equi

pmen

t,is

acco

unte

dfo

ratc

ostl

ess

accu

mul

ated

depr

ecia

tion

and

impa

irmen

t.Al

loth

erpr

oper

ty,p

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and

equi

pmen

tare

show

nat

reva

luat

edam

ount

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sed

onpe

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ast

ever

y5

year

s)va

luat

ions

byex

tern

alin

depe

nden

tval

uers

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the

Gro

up's

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agem

ent,

less

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ulat

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prec

iatio

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uent

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mul

ated

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sses

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ost

incl

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ent

cost

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curre

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ition

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ent.

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ated

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ecia

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are

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ains

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stat

edto

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asse

ts.A

llot

herr

epai

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aint

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sts

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ged

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est

atem

ent

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mpr

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inco

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crea

ses

inth

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ount

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onre

valu

atio

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ant

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tar

ere

cogn

ised

inot

herc

ompr

ehen

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inco

me

and

cred

ited

toth

ere

equi

ty.

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ount

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ty,p

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terr

eval

uatio

nan

dth

eca

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ount

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asse

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ffere

dim

pairm

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uspe

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asa

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pens

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rere

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prec

iatio

n,is

dedu

cted

from

expe

nses

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rein

clud

edin

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stat

emen

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ompr

ehen

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inco

me

inpr

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uspe

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and

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rem

aini

ngam

ount

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seis

cred

ited

agai

nst

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rese

rve.

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atof

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ious

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ease

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eas

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ised

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inco

me

and

char

ged

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here

valu

atio

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edi

rect

lyin

equi

ty;a

llot

her

decr

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ech

arge

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prof

itor

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est

atem

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ensi

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ged

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ecia

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tis

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ulat

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ing

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stra

ight

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usef

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umbe

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ild

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frast

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ther

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nt

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parts

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aint

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ent

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ition

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the

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uctio

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asse

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atne

cess

arily

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asu

bsta

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ltim

e(m

ore

than

one

year

)to

get

read

yfo

rin

tend

edus

eor

sale

(qua

lifyi

ngas

sets

)are

capi

talis

edas

part

ofth

eco

sts

ofth

ose

asse

ts(N

ote

2.17

).W

hen

prop

erty

isre

tired

orot

herw

ise

disp

osed

of,t

heco

stan

dre

late

dac

cum

ulat

edde

prec

iatio

nar

ede

reco

gnis

edan

dan

yre

late

dga

ins

orlo

sses

are

incl

uded

inpr

ofit

orlo

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the

stat

emen

tof

com

preh

ensi

vein

com

e.G

ains

orlo

sses

ondi

spos

alof

prop

erty

,pla

ntan

deq

uipm

enta

rede

term

ined

F-100

245496 Olive pp138-imp 27/06/2017 09:22 Page 100

84AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Summaryof

significanta

ccou

ntingpo

licies

aspr

ocee

dsre

ceiv

edon

disp

osal

less

the

book

valu

eof

asse

tsdi

spos

ed.

Whe

nre

valu

edas

sets

are

disp

osed

,the

corre

spon

ding

porti

onof

reva

luat

ion

rese

rve

istra

nsfe

rred

tore

tain

edea

rnin

gs(d

efic

it).

futu

reec

onom

icbe

nefit

sas

soci

ated

with

thes

eco

sts

will

flow

toth

eG

roup

and

the

Com

pany

and

the

cost

sca

nbe

mea

sure

dre

liabl

y.Th

eca

rryin

gam

ount

ofth

ere

plac

edpa

rtis

dere

cogn

ised

.Al

loth

erre

pair

and

mai

nten

ance

cost

sar

ere

cogn

ised

asex

pens

esin

the

stat

emen

tofc

ompr

ehen

sive

inco

me

durin

gth

efin

anci

alpe

riod

inwh

ich

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incu

rred.

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ctio

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prog

ress

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nsfe

rred

toap

prop

riate

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gorie

sof

prop

erty

,pla

ntan

deq

uipm

ent

when

itis

com

plet

edan

dre

ady

fori

tsin

tend

edus

e.

2.7

Inta

ngib

leas

sets

(a)P

aten

tsan

dlic

ence

sPa

tent

san

dlic

ence

sar

est

ated

atco

st.T

rade

mar

ksan

dlic

ence

sac

quire

din

busi

ness

com

bina

tion

are

reco

rded

atfa

irva

lue

atth

eda

teof

acqu

isitio

n.Tr

adem

arks

and

licen

ces

are

acco

unte

dfo

ratc

ost

less

accu

mul

ated

amor

tisat

ion.

Amor

tisat

ion

isca

lcul

ated

usin

ga

stra

ight

-line

basi

sove

rthe

estim

ated

usef

ullife

of3

to5

year

sor

asp

ecific

valid

ityte

rmof

alic

ence

and/

orpa

tent

,ifa

ny.U

sefu

llife

isre

view

edon

year

-by-

year

basi

s.(b

)Com

pute

rsof

twar

eAc

quire

dco

mpu

ters

oftw

are

licen

ces

are

capi

talis

edon

the

basi

sof

the

cost

sin

curre

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acqu

irean

dbr

ing

tous

eth

esp

ecific

softw

are.

Thes

eco

sts

are

amor

tised

over

thei

rest

imat

edus

eful

lives

(2to

4ye

ars)

.(c

)Em

issi

onal

low

ance

sFo

rdet

aile

dde

scrip

tion

ofac

coun

ting

polic

yfo

rem

issio

nal

lowa

nces

see

Note

2.23

.(d

)Oth

erin

tang

ible

asse

tsIn

tang

ible

asse

tsex

pect

edto

prov

ide

econ

omic

bene

fits

infu

ture

perio

dsar

eva

lued

atac

quisi

tion

cost

less

subs

eque

ntac

cum

ulat

edam

ortis

atio

nan

dan

yac

cum

ulat

edim

pairm

ent

loss

es.

Amor

tisat

ion

isca

lcula

ted

onth

est

raig

ht-li

neba

sis

over

the

estim

ated

econ

omic

usef

ullif

eof

3to

4ye

ars.

2.8

Impa

irmen

tofn

on-fi

nanc

iala

sset

sAt

each

repo

rting

date

,th

eG

roup

/Com

pany

revi

ews

the

book

valu

esof

itspr

oper

ty,

plan

tan

deq

uipm

enta

ndin

tang

ible

asse

tsto

dete

rmin

ewh

ethe

rthe

rear

ean

yind

icat

ions

that

thos

eas

sets

have

suffe

red

anim

pairm

entl

oss.

Ifan

ysu

chin

dica

tion

exis

ts,t

here

cove

rabl

eam

ount

ofth

eas

seti

ses

timat

edin

orde

rto

dete

rmin

eth

eex

tent

ofth

eim

pairm

entl

oss

(ifan

y).W

here

itis

impo

ssib

leto

estim

ate

the

reco

vera

ble

amou

ntof

anin

divid

uala

sset

,the

reco

vera

ble

amou

ntof

the

cash

-gen

erat

ing

unit

towh

ichth

eas

setb

elon

gsis

estim

ated

.W

here

are

ason

able

and

cons

isten

tbas

isof

allo

catio

nca

nbe

iden

tifie

d,as

sets

are

also

allo

cate

dto

indi

vidu

alca

sh-g

ener

atin

gun

its,o

ther

wise

they

are

allo

cate

dto

the

smal

lest

grou

psof

cash

-gen

erat

ing

units

for

which

are

ason

able

and

cons

iste

ntal

loca

tion

basis

can

beid

entif

ied.

Inta

ngib

leas

sets

with

inde

finite

usef

ulliv

esan

din

tang

ible

asse

tsno

tyet

avai

labl

efo

ruse

are

test

edfo

rim

pairm

enta

teac

hre

porti

ngda

te,a

ndwh

enev

erth

ere

isan

indi

catio

nth

atth

eas

setm

aybe

impa

ired.

asse

ssin

gva

lue

inus

e,th

eex

pect

edfu

ture

cash

flows

are

disc

ount

edto

thei

rpre

sent

valu

eus

ing

the

disc

ount

rate

that

refle

ctsc

urre

ntm

arke

tass

essm

ents

ofth

etim

eva

lue

ofm

oney

and

the

risks

spec

ificto

the

asse

tfor

which

the

estim

ates

offu

ture

cash

flows

have

notb

een

adju

sted

.If

the

reco

vera

ble

amou

ntof

anas

set(

orca

sh-g

ener

atin

gun

it)is

estim

ated

tobe

less

than

itsca

rryin

gam

ount

,the

carry

ing

amou

ntof

the

asse

t(ca

sh-g

ener

atin

gun

it)is

redu

ced

toits

reco

vera

ble

amou

nt.

Anim

pairm

entl

oss

isre

cogn

ised

imm

edia

tely

inth

eite

mof

com

preh

ensi

vein

com

e.W

here

anim

pairm

entl

oss

subs

eque

ntly

reve

rses

,the

carry

ing

amou

ntof

the

asse

t(ca

sh-g

ener

atin

gun

it)is

incr

ease

dto

the

revi

sed

estim

ate

ofits

reco

vera

ble

amou

nt,b

utso

that

the

incr

ease

dca

rryin

gam

ount

does

note

xcee

dth

eca

rryin

gam

ount

that

woul

dha

vebe

ende

term

ined

had

noim

pairm

ent

loss

been

reco

gnis

edfo

rthe

asse

t(ca

sh-g

ener

atin

gun

it)in

prio

ryea

rs.A

reve

rsal

ofan

impa

irmen

tlo

ssis

reco

gnis

edim

med

iate

lyin

the

item

ofco

mpr

ehen

sive

inco

me.

2.9

Inve

stm

entp

rope

rty

for

capi

tal

appr

ecia

tion.

Inve

stm

ent

prop

erty

isre

cogn

ised

initi

ally

atac

quis

ition

cost

,an

dsu

bseq

uent

lyat

fair

valu

ewh

ichis

dete

rmin

edby

inde

pend

entp

rope

rlyqu

alifi

edpr

oper

tyva

luer

san

dba

sed

onre

cent

expe

rienc

ein

valu

atio

nof

asse

tsof

simila

rna

ture

.In

vest

men

tpr

oper

tyis

not

depr

ecia

ted,

and

gain

orlo

sson

chan

gein

the

fair

valu

eof

inve

stm

entp

rope

rtyis

reco

gnis

edin

prof

itor

loss

inth

est

atem

ento

fcom

preh

ensi

vein

com

efo

rthe

repo

rting

perio

d.Tr

ansf

ers

toan

dfro

min

vest

men

tpro

perty

are

mad

eon

lywh

enth

ere

isan

evid

ence

ofch

ange

inth

epu

rpos

eof

use

ofas

sets

.Ce

rtain

imm

ovab

lepr

oper

tym

aybe

occu

pied

byth

eG

roup

,wi

thth

ere

mai

nder

bein

ghe

ldfo

rre

ntal

yiel

dsor

for

capi

tala

ppre

ciat

ion.

Ifpa

rtof

imm

ovab

lepr

oper

tyoc

cupi

edby

the

Gro

upca

nbe

sold

sepa

rate

ly,t

heG

roup

acco

unts

fors

uch

prop

erty

sepa

rate

ly.

The

porti

onth

atis

owne

r-occ

upie

dis

acco

unte

dfo

run

der

IAS

16,a

ndth

epo

rtion

that

ishe

ldto

earn

rent

als

isac

coun

ted

foru

nder

IAS

40.

2.10

Non

-cur

rent

asse

tshe

ldfo

rsal

eN

on-c

urre

ntas

sets

held

fors

ale

are

stat

edat

the

lowe

roft

heca

rryin

gam

ount

and

fair

valu

ele

ssco

sts

tose

llif

the

carry

ing

amou

ntis

reco

vere

dpr

inci

pally

thro

ugh

asa

letra

nsac

tion

rath

erth

anth

roug

ha

cont

inui

ngus

e.

2.11

Fina

ncia

lass

ets

The

Gro

up/C

ompa

nycl

assif

ies

itsfin

anci

alas

sets

into

the

follo

wing

cate

gorie

s:fin

anci

alas

sets

atfa

irva

lue

thro

ugh

prof

itor

loss

,hel

d-to

-mat

urity

finan

ciala

sset

s,lo

ans

gran

ted

and

rece

ivabl

es.

The

clas

sifica

tion

offin

anci

alas

sets

isba

sed

onth

epu

rpos

eof

finan

cial

asse

tsac

quire

d,th

em

anag

emen

tde

term

ines

the

clas

sifica

tion

offin

anci

alas

sets

atin

itialr

ecog

nitio

n.R

egul

arpu

rcha

ses

and

sale

sof

finan

cial

asse

tsar

ere

cogn

ised

onth

etra

de-d

ate

the

date

onwh

ich

the

Gro

up/C

ompa

nyco

mm

itsto

purc

hase

orse

llthe

asse

t.Fi

nanc

iala

sset

sar

ein

itially

reco

gnise

dat

fair

valu

e,pl

usdi

rect

lyat

tribu

tabl

etra

nsac

tion

cost

sfo

rinv

estm

ents

notc

arrie

dat

fair

valu

eth

roug

hpr

ofit

orlo

ss.

The

subs

eque

ntm

easu

rem

ento

ffin

anci

alas

sets

depe

nds

onth

eirc

lass

ificat

ion

asfo

llows

:

F-101

245496 Olive pp138-imp 27/06/2017 09:22 Page 101

85AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Summaryof

significanta

ccou

ntingpo

licies

Fina

ncia

lass

ets

atfa

irva

lue

thro

ugh

prof

itor

loss

finan

cial

inst

rum

ents

only

(see

Note

2.12

).

Hel

d-to

-mat

urity

finan

cial

asse

tsH

eld-

to-m

atur

ityin

vest

men

tsar

eno

n-de

rivat

ive

finan

ciala

sset

stra

ded

inac

tive

mar

ketw

ithfix

edor

and

abilit

yto

hold

tom

atur

ity.H

eld-

to-m

atur

ityin

vest

men

tsar

em

easu

red

atam

ortis

edco

stus

ing

the

effe

ctive

inte

rest

rate

met

hod.

Effe

ctive

inte

rest

rate

met

hod

isus

edto

calcu

late

amor

tised

cost

offin

ancia

lass

ets

and

allo

cate

inte

rest

inco

me

over

the

rele

vant

perio

d.Th

eef

fect

ive

inte

rest

rate

exac

tlydi

scou

nts

estim

ated

futu

reca

shin

flows

orou

tflow

sto

netc

arry

ing

amou

ntof

finan

cial

asse

tsov

erth

eex

pect

edlif

eof

the

finan

cial

inst

rum

ento

rash

orte

rper

iod,

ifne

cess

ary.

Avai

labl

e-fo

r-sal

efin

anci

alas

sets

Avai

labl

e-fo

r-sal

efin

anci

alas

sets

are

thos

eno

n-de

rivat

ive

finan

cial

asse

tsth

atar

ede

sign

ated

asav

aila

ble

for

sale

orar

eno

tcl

assi

fied

aslo

ans

and

rece

ivab

les,

held

-to-m

atur

ityin

vest

men

tsor

finan

cial

asse

tsat

fair

valu

eth

roug

hpr

ofit

orlo

ss.

Man

agem

ent

dete

rmin

esth

eap

prop

riate

clas

sifica

tion

ofits

inve

stm

ents

atth

etim

eof

the

purc

hase

.Av

aila

ble-

for-s

ale

secu

ritie

sar

em

easu

red

atfa

irva

lue

base

don

quot

edbi

dpr

ices

oram

ount

sde

rived

from

disc

ount

edca

shflo

wm

odel

s.U

nrea

lised

gain

san

dlo

sses

aris

ing

from

chan

ges

inth

efa

irva

lue

offin

anci

alas

sets

clas

sifie

das

avai

labl

e-fo

r-sal

ear

ere

cogn

ised

dire

ctly

ineq

uity

thro

ugh

the

stat

emen

tofc

hang

esin

equi

tyex

cept

fori

mpa

irmen

tlos

ses

and

fore

ign

exch

ange

gain

sor

loss

es.

Whe

nsu

chfin

anci

alas

sets

are

dere

cogn

ised

the

cum

ulat

ive

reva

luat

ion

gain

orlo

sspr

evio

usly

reco

gnis

edin

equi

tyis

recl

assif

ied

topr

ofit

orlo

ssin

the

stat

emen

tof

com

preh

ensi

vein

com

e.H

owev

er,

inte

rest

rece

ived

onsu

chfin

anci

alas

sets

calcu

late

dus

ing

the

effe

ctive

inte

rest

rate

isre

cogn

ised

asin

com

eof

the

repo

rting

perio

d.

Loan

san

dre

ceiv

able

sLo

ans

and

rece

ivab

les

are

non-

deriv

ativ

efin

ancia

lass

ets

with

fixed

orde

term

inab

lepa

ymen

tsth

atar

eno

tquo

ted

inan

activ

em

arke

t.Th

eyar

ein

clud

edin

curre

ntas

sets

,exc

eptf

orm

atur

ities

grea

ter

than

12m

onth

saf

tert

heda

teof

the

prep

arat

ion

ofth

est

atem

ento

ffin

anci

alpo

sitio

n,in

whic

hca

seth

eyar

ecl

assi

fied

asno

n-cu

rrent

asse

ts.

Loan

san

dre

ceiva

bles

are

initia

llyre

cogn

ised

atac

quisi

tion

cost

(fair

valu

eof

cons

ider

atio

ntra

nsfe

rred)

and

subs

eque

ntly

carri

edat

amor

tised

cost

usin

gth

eef

fect

ive

inte

rest

rate

met

hod.

Gai

nsan

dlo

sses

are

reco

gnise

din

prof

itor

loss

inth

est

atem

ento

fcom

preh

ensi

vein

com

ewh

enth

ese

asse

tsar

ede

reco

gnise

d,im

paire

dor

amor

tised

.Tr

ade

rece

ivab

les

are

reco

gnise

din

itial

lyat

fair

valu

ean

dsu

bseq

uent

lym

easu

red

atam

ortis

edco

stus

ing

the

effe

ctive

inte

rest

met

hod,

less

prov

isio

nfo

rim

pairm

ent.

Whe

nth

eou

tcom

eof

aco

nstru

ctio

nco

ntra

ctca

nbe

estim

ated

relia

bly,

cont

ract

reve

nue

and

cont

ract

cost

sar

ere

cogn

ised

byre

fere

nce

toth

ewo

rkac

tual

lyco

mpl

eted

atth

een

dof

each

repo

rting

perio

d,i.e

.usin

gth

est

age

ofco

mpl

etio

n(o

ther

wise

refe

rred

toas

the

perc

enta

geof

com

plet

ion)

met

hod

forl

ong-

term

cont

ract

s.U

nder

this

met

hod,

cont

ract

reve

nue

and

cont

ract

cost

sar

em

easu

red

byre

fere

nce

toth

epe

rcen

tage

ofac

tual

cost

sin

curre

dan

dac

tual

reve

nue

earn

edto

date

toes

timat

edto

talc

ontra

ctco

sts

and

cont

ract

reve

nue

Impa

irmen

toff

inan

cial

asse

tsAt

each

repo

rting

date

the

Gro

upan

dth

eC

ompa

nyas

sess

whet

hert

here

isan

indi

catio

nth

atfin

anci

alas

sets

may

beim

paire

d.A

finan

ciala

sset

isde

emed

tobe

impa

ired

ifth

ere

isob

ject

ive

evid

ence

ofim

pairm

enta

sa

resu

ltof

one

orm

ore

even

tsth

atha

soc

curre

daf

tert

hein

itialr

ecog

nitio

nof

the

asse

tan

dth

atlo

ssev

enth

asan

impa

cton

the

estim

ated

futu

reca

shflo

wsof

the

finan

cial

asse

ts.E

vide

nce

ofim

pairm

entm

ayin

clud

ein

dica

tions

that

the

debt

ors

ora

grou

pof

debt

ors

isex

perie

ncin

gsig

nific

ant

finan

cial

diffi

culty

,def

ault

orde

linqu

ency

inin

tere

stor

prin

cipa

lpay

men

ts,t

hepr

obab

ility

that

they

will

ente

rban

krup

tcy

orot

herf

inan

cial

reor

gani

satio

nan

dwh

ere

obse

rvab

leda

tain

dica

teth

atth

ere

isa

mea

sura

ble

decr

ease

inth

ees

timat

edfu

ture

cash

flows

,suc

has

chan

ges

inar

rear

sor

econ

omic

cond

ition

sth

atco

rrela

tewi

thde

faul

ts.F

orfin

ancia

lass

ets

carri

edat

amor

tised

cost

,the

amou

ntof

the

valu

eof

expe

cted

futu

reca

shflo

ws,e

stim

ated

usin

gth

eor

igin

alef

fect

ivein

tere

stra

te.

The

carry

ing

amou

ntof

the

finan

ciala

sset

isdi

rect

lyre

duce

dby

the

amou

ntof

estim

ated

impa

irmen

tlo

ss,

exce

ptfo

rtra

dere

ceiv

able

s,fo

rwh

ich

impa

irmen

tis

reco

rded

thro

ugh

allo

wanc

eac

coun

t.Im

paire

dtra

dere

ceiva

bles

are

writt

en-o

ffwh

enth

eyar

eid

entif

ied

asirr

ecov

erab

le.

Ifsu

bseq

uent

toth

ere

porti

ngda

teth

eam

ount

ofth

eim

pairm

entl

oss

decr

ease

san

dth

ede

crea

seca

nbe

rela

ted

obje

ctiv

ely

toan

even

tocc

urrin

gaf

tert

heim

pairm

entw

asre

cogn

ised,

the

prev

ious

lyre

cogn

ised

impa

irmen

tlos

sis

reve

rsed

and

reco

gnise

din

the

stat

emen

tofc

ompr

ehen

sive

inco

me

toth

eex

tent

that

the

carry

ing

valu

eof

the

asse

tdoe

sno

texc

eed

itsam

ortis

edco

stat

the

reve

rsal

date

that

woul

dha

vebe

ende

term

ined

had

noim

pairm

entl

oss

been

reco

gnis

edfo

rthe

asse

tin

prio

ryea

rs.

Der

ecog

nitio

nof

finan

cial

asse

tsA

finan

cial

asse

t(or

,whe

reap

plica

ble

apa

rtof

afin

anci

alas

seto

rpar

tofa

grou

pof

simila

rfin

anci

alas

sets

)is

dere

cogn

ised

when

:-

the

right

sto

rece

iveca

shflo

wsfro

mth

eas

seth

ave

expi

red;

-th

erig

htto

rece

iveca

shflo

wsfro

mth

eas

seti

sre

tain

ed,b

utan

oblig

atio

nis

assu

med

topa

yth

em

-th

erig

hts

tore

ceive

cash

flows

from

the

asse

tare

trans

ferre

dan

dei

ther

(a)s

ubst

antia

llyal

lthe

risks

and

rewa

rds

ofth

eas

seth

ave

been

trans

ferre

d,or

(b)s

ubst

antia

llyal

lthe

risks

and

rewa

rds

ofth

eas

seth

ave

neith

erbe

entra

nsfe

rred

norr

etai

ned,

butc

ontro

loft

heas

seth

asbe

entra

nsfe

rred.

2.12

Der

ivat

ive

finan

cial

inst

rum

ents

Der

ivat

ive

finan

ciali

nstru

men

tsar

ecl

assi

fied

ashe

ldfo

rtra

ding

and

they

initia

llyre

cogn

ised

atfa

irva

lue,

and

subs

eque

ntly

are

also

mea

sure

dat

fair

valu

e.Th

efa

irva

lue

isde

term

ined

with

refe

renc

eto

quot

edm

arke

tpric

esor

usin

gva

luat

ion

tech

niqu

esen

com

pass

ing

the

pres

entm

arke

tval

ues

orco

ntra

ctua

lpric

esof

asse

tsre

latin

gto

finan

cial

inst

rum

ents

,and

allo

ther

inpu

ts.

Der

ivat

ive

finan

cial

inst

rum

ents

are

clas

sifie

das

asse

tswh

enth

eirf

airv

alue

ispo

sitiv

e,an

dth

eyar

ecl

assi

fied

aslia

biliti

eswh

enth

eirf

airv

alue

isne

gativ

e.G

ain

orlo

sson

thes

efin

anci

alin

stru

men

tsis

reco

gnise

din

prof

itor

loss

inth

est

atem

ento

fcom

preh

ensi

vein

com

ewi

thin

finan

cein

com

eor

finan

ceco

sts.

2.13

Inve

ntor

ies

Inve

ntor

ies

are

stat

edat

the

lowe

rofc

osta

ndne

trea

lisab

leva

lue.

Cost

isde

term

ined

usin

gth

efir

st-

in,

first

-out

(FIF

O)

met

hod,

expe

ctfo

rna

tura

lgas

and

lique

fied

natu

ralg

as,t

heco

stof

whic

his

dete

rmin

edus

ing

the

weig

hted

aver

age

cost

ing

met

hod.

The

cost

ofin

vent

orie

sco

mpr

ises

purc

hase

F-102

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86AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Summaryof

significanta

ccou

ntingpo

licies

pric

e,ta

xes

(oth

erth

anth

ose

subs

eque

ntly

reco

vera

ble

byth

eG

roup

and

the

Com

pany

from

the

tax

auth

oriti

es),

trans

porta

tion,

hand

ling

and

othe

rco

sts

dire

ctly

attri

buta

ble

toth

eac

quisi

tion

ofin

vent

orie

s.C

ostd

oes

noti

nclu

debo

rrowi

ngs

cost

s.N

etre

alisa

ble

valu

eis

the

estim

ated

sellin

gpr

ice

inth

eor

dina

ryco

urse

ofbu

sine

ss,l

ess

attri

buta

ble

varia

ble

sellin

gex

pens

es.

2.14

Cas

han

dca

sheq

uiva

lent

sC

ash

and

cash

equi

vale

nts

inclu

deca

shin

hand

,dep

osits

held

atca

llwith

bank

san

dot

hers

hort-

term

high

lyliq

uid

inve

stm

ents

with

orig

inal

mat

uritie

sof

thre

em

onth

sor

less

.Fo

rth

epu

rpos

esof

the

cash

flow

stat

emen

t,ca

shan

dca

sheq

uiva

lent

sco

mpr

iseca

shin

hand

depo

sits

held

atca

llwi

thba

nks

and

othe

rsho

rt-te

rmhi

ghly

liqui

din

vest

men

tswi

thor

igin

alm

atur

ities

ofth

ree

mon

ths

orle

ss,a

ndba

nkov

erdr

afts

.Ban

kov

erdr

afts

are

show

nun

derl

iabi

litie

swi

thin

curre

ntbo

rrowi

ngs

inth

eba

lanc

esh

eet.

2.15

Shar

eca

pita

lO

rdin

ary

shar

esar

ecl

assi

fied

aseq

uity

.W

hen

anen

titya

cqui

resi

tsow

nsh

ares

,the

shar

esac

quire

dar

ede

duct

edfro

meq

uity

.For

the

purp

ose

ofth

est

atem

ento

fcom

preh

ensi

vein

com

e,no

gain

orlo

ssis

reco

gnise

don

the

purc

hase

,sal

e,iss

uent

s.Sh

are

prem

ium

repr

esen

tsth

edi

ffere

nce

betw

een

the

nom

inal

valu

eof

the

new

shar

eis

sue

and

the

fair

valu

eof

cons

ider

atio

nre

ceiv

edfo

rsha

res

sold

.

2.16

Trad

epa

yabl

esTr

ade

paya

bles

are

reco

gnis

edwh

enth

eot

herp

arty

has

perfo

rmed

itsob

ligat

ions

unde

rthe

cont

ract

.Tr

ade

paya

bles

are

initi

ally

reco

gnis

edat

fair

valu

ean

dsu

bseq

uent

lyca

rried

atam

ortis

edco

stus

ing

the

effe

ctiv

ein

tere

stra

tem

etho

d.

2.17

Borro

wing

sBo

rrowi

ngs

are

reco

gnis

edin

itially

atfa

irva

lue,

neto

ftra

nsac

tion

cost

sin

curre

d.Bo

rrowi

ngs

are

subs

eque

ntly

carri

edat

amor

tised

cost

.Any

diffe

renc

ebe

twee

nth

eam

ount

atin

itialr

ecog

nitio

nan

dth

ere

dem

ptio

nva

lue

isre

cogn

ised

inpr

ofit

orlo

ssin

the

stat

emen

tofc

ompr

ehen

sive

inco

me

over

the

perio

dof

the

borro

wing

sus

ing

the

effe

ctiv

ein

tere

stra

tem

etho

d.Bo

rrowi

ngs

are

class

ified

ascu

rrent

liabi

lities

unle

ssth

eC

ompa

nyan

dth

eG

roup

has

anun

cond

ition

alrig

htto

defe

rset

tlem

ento

fthe

liabi

lity

fora

tlea

st12

mon

ths

afte

rthe

finan

cial

repo

rting

date

.Bo

rrowi

ngco

sts

dire

ctly

attri

buta

ble

toth

eac

quis

ition,

cons

truct

ion

orpr

oduc

tion

ofas

sets

that

nece

ssar

ilyta

kea

subs

tant

ialt

ime

(mor

eth

anon

eye

ar)

toge

tre

ady

for

inte

nded

use

orsa

le(q

ualif

ying

asse

ts)a

reca

pita

lised

aspa

rtof

the

cost

sof

thos

eas

sets

until

thos

eas

sets

are

com

plet

ely

read

yfo

ruse

orsa

le.I

nter

esti

ncom

eth

atre

late

tote

mpo

rali

nves

tmen

tofb

orro

wed

fund

sun

tilth

eir

use

fort

heac

quisi

tion

ofth

eas

sets

are

dedu

cted

from

the

acqu

isitio

nco

stof

the

asse

ts.

2.18

Inco

me

tax

and

defe

rred

inco

me

tax

Inco

me

tax

Inco

me

taxa

sset

sand

liabi

lities

fort

hecu

rrent

and

prio

rper

iods

are

mea

sure

dat

the

amou

ntex

pect

edto

bere

cove

red

from

orpa

idto

the

taxa

tion

auth

oritie

s.Th

eta

xra

tes

and

tax

laws

used

toco

mpu

teth

eam

ount

ofin

com

eta

xar

eth

ose

that

are

enac

ted

orsu

bsta

ntive

lyen

acte

dat

the

bala

nce

shee

tda

te.

Cur

rent

inco

me

taxi

scal

cula

ted

onpr

ofitf

orth

eye

ar,n

etof

defe

rred

inco

me

tax.

Calcu

latio

nof

inco

me

tax

isba

sed

onre

quire

men

tsof

the

Lith

uani

anre

gula

tory

legi

slatio

non

taxa

tion.

In20

15an

d20

14,a

stan

dard

inco

me

tax

rate

of15

%wa

sap

plica

ble

toth

eco

mpa

nies

inLi

thua

nia.

Taxl

osse

scan

beca

rried

forw

ard

fori

ndef

inite

perio

d,ex

cept

forl

osse

sin

curre

das

are

sulto

fdisp

osal

ofse

curit

ies

and/

orde

rivat

ive

finan

cial

inst

rum

ents

.Su

chca

rryin

gfo

rwar

dis

disr

upte

dift

heCo

mpa

nyte

rmin

ates

the

activ

ities

that

caus

edth

ese

loss

es,e

xcep

twhe

nth

eCo

mpa

nydi

scon

tinue

sits

activ

ities

and/

orde

rivat

ive

finan

cialin

stru

men

tsca

nbe

carri

edfo

rwar

dfo

r5co

nsec

utive

year

san

don

lybe

used

tore

duce

the

taxa

ble

inco

me

earn

edfro

mth

etra

nsac

tions

ofth

esa

me

natu

re.

Def

erre

din

com

eta

xD

efer

red

inco

me

tax

isac

coun

ted

foru

sing

the

liabi

litym

etho

d.D

efer

red

tax

asse

tsan

dde

ferre

dta

xlia

bilit

yar

ere

cogn

ised

forf

utur

eta

xpu

rpos

esto

refle

ctdi

ffere

nces

aris

ing

betw

een

the

tax

base

sof

asse

tsan

dlia

biliti

esan

dth

eirc

arry

ing

amou

nts

inth

efin

ancia

lsta

tem

ents

.Def

erre

dta

xlia

bilit

ies

are

reco

gnis

edon

allt

empo

rary

diffe

renc

esth

atwi

llinc

reas

eth

eta

xabl

epr

ofit

infu

ture

,whe

reas

defe

rred

tax

asse

tsar

ere

cogn

ised

toth

eex

tent

that

ispr

obab

leto

redu

ceth

eta

xabl

epr

ofit

infu

ture

.Def

erre

din

com

eta

xas

sets

and

liabi

litie

sar

eno

trec

ogni

sed

when

tem

pora

rydi

ffere

nces

arise

from

good

will

(orn

egat

ivego

odwi

ll)or

from

initia

lrec

ogni

tion

ofan

asse

torl

iabi

lityin

atra

nsac

tion

othe

rtha

na

busi

ness

com

bina

tion

that

atth

etim

eof

the

trans

actio

naf

fect

sne

ither

acco

untin

g,no

rtax

able

prof

itor

loss

.Th

eca

rryin

gam

ount

sof

defe

rred

inco

me

tax

asse

tsar

ere

view

edat

each

date

ofth

est

atem

ento

ffin

anci

alpo

sitio

nan

dre

duce

dto

the

exte

ntit

isno

long

erpr

obab

leth

atsu

ffici

entt

axab

lepr

ofit

will

beav

aila

ble

agai

nstw

hich

such

defe

rred

inco

me

tax

asse

tsco

uld

beut

ilised

infu

llor

inpa

rt.D

efer

red

inco

me

tax

asse

tsar

ere

duce

dto

anam

ount

whic

his

likel

yto

redu

ceth

eta

xabl

epr

ofit

infu

ture

.D

efer

red

inco

me

taxi

sde

term

ined

usin

gta

xrat

esth

atar

eex

pect

edto

appl

ywhe

nth

ere

late

dde

ferre

din

com

eas

seti

sre

alis

edor

the

defe

rred

inco

me

tax

liabi

lity

isse

ttled

.D

efer

red

inco

me

tax

asse

tsan

dlia

bilit

ies

are

offs

etwh

enth

ere

isa

lega

llyen

forc

eabl

erig

htto

offs

etcu

rrent

tax

asse

tsag

ains

tcur

rent

tax

liabi

litie

san

dwh

enth

ede

ferre

din

com

eta

xes

rela

teto

the

sam

efis

cala

utho

rity.

Cur

rent

and

defe

rred

inco

me

tax

Cur

rent

and

defe

rred

inco

me

tax

are

reco

gnise

das

inco

me

orex

pens

esan

din

clud

edin

netp

rofit

orlo

ssfo

rthe

repo

rting

perio

d,ex

cept

fort

heca

ses

when

tax

aris

esfro

ma

trans

actio

nor

even

ttha

tis

reco

gnis

eddi

rect

lyin

equi

tyor

othe

rcom

preh

ensi

vein

com

ein

the

sam

eor

subs

eque

ntpe

riod

oron

busi

ness

com

bina

tion.

F-103

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87AN

NUAL

FINAN

CIAL

STAT

EMEN

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|Summaryof

significanta

ccou

ntingpo

licies

2.19

Empl

oyee

bene

fits

Soci

alse

curit

yco

ntrib

utio

nsTh

eC

ompa

nyan

dth

eG

roup

pay

soci

alse

curit

yco

ntrib

utio

nsto

the

Stat

eSo

cial

Secu

rity

Fund

(the

Fund

)on

beha

lfof

itsem

ploy

ees

base

don

the

defin

edco

ntrib

utio

npl

anin

acco

rdan

cewi

thth

elo

cal

lega

lreq

uire

men

ts.A

defin

edco

ntrib

utio

npl

anis

apl

anun

derw

hich

the

Gro

upan

dth

eCo

mpa

nypa

yfix

edco

ntrib

utio

nsin

toth

eFu

ndan

dwi

llha

veno

lega

lor

cons

truct

ive

oblig

atio

nsto

pay

furth

erco

ntrib

utio

nsif

the

Fund

does

not

hold

suffi

cien

tas

sets

topa

yal

lem

ploy

ees

bene

fits

rela

ting

toem

ploy

eese

rvic

ein

the

curre

ntan

dpr

iorp

erio

d.Th

eso

cial

secu

rity

cont

ribut

ions

are

reco

gnis

edas

anex

pens

eon

anac

crua

lbas

isan

dar

ein

clud

edwi

thin

rem

uner

atio

nex

pens

es.

Term

inat

ion

bene

fits

Term

inat

ion

bene

fits

are

paya

ble

when

ever

ane

norm

alre

tirem

entd

ate

orwh

enev

eran

empl

oyee

acce

pts

volu

ntar

yre

dund

ancy

inex

chan

gefo

rthe

sebe

nefit

s.Th

eC

ompa

nyan

dth

eG

roup

reco

gnis

ete

rmin

atio

nbe

nefit

swh

enit

isde

mon

stra

bly

com

mitt

edto

eith

erte

rmin

atin

gth

eem

ploy

men

tofc

urre

ntem

ploy

ees

acco

rdin

gto

ade

taile

dfo

rmal

plan

with

outp

ossi

bility

ofwi

thdr

awal

orpr

ovid

ing

term

inat

ion

bene

fits

asa

resu

ltof

anof

ferm

ade

toen

cour

age

volu

ntar

yre

dund

ancy

.Non

-cur

rent

bene

fits

are

reco

gnise

dat

pres

entv

alue

disc

ount

edus

ing

mar

keti

nter

estr

ate.

Actu

aria

lgai

nsor

loss

esar

ising

from

adju

stm

ents

base

don

expe

rienc

eor

from

chan

ges

inac

tuar

ial

assu

mpt

ions

are

reco

gnise

dim

med

iate

lywi

thin

the

Gro

up's

and

the

Com

pany

'sot

herc

ompr

ehen

sive

inco

me

inth

est

atem

ento

fcom

preh

ensi

vein

com

e.Al

lpas

tser

vice

cost

sar

ere

cogn

ised

imm

edia

tely.

Long

-term

empl

oyee

bene

fits

Each

empl

oyee

ofre

tirem

ent

age

who

term

inat

eshi

s/he

rem

ploy

men

twi

thth

eG

roup

and

the

Com

pany

upon

retir

emen

tis

entit

led

tore

ceiv

ea

paym

ente

qual

to2-

6m

onth

lysa

larie

sac

cord

ing

toLi

thua

nian

laws

and

the

term

sof

the

colle

ctive

empl

oym

enta

gree

men

t.A

liabi

lityfo

rsuc

hpe

nsio

nbe

nefit

sis

reco

gnise

din

the

stat

emen

toff

inan

cial

posit

ion

and

itre

flect

sth

epr

esen

tval

ueof

thes

ebe

nefit

sat

the

date

ofth

eba

lanc

esh

eet.

The

afor

emen

tione

dno

n-cu

rrent

liabi

lity

forp

ensi

onbe

nefit

sto

empl

oyee

sat

the

date

ofth

est

atem

ento

ffin

ancia

lpos

ition

ises

timat

edwi

thre

fere

nce

toac

tuar

yva

luat

ions

usin

gth

epr

ojec

ted

rela

tive

unit

met

hod.

The

pres

entv

alue

ofth

ede

fined

non-

curre

ntlia

bilit

yfor

pens

ion

bene

fits

toem

ploy

ees

isde

term

ined

bydi

scou

ntin

gth

ees

timat

edfu

ture

cash

flows

usin

gth

eef

fect

ivein

tere

stra

tes

asse

tfor

gove

rnm

entb

onds

deno

min

ated

ina

curre

ncy

inwh

ich

the

bene

fits

will

bepa

idto

empl

oyee

san

dth

atha

vem

atur

ityte

rmsim

ilart

oth

atof

the

rela

ted

liabi

lity.

2.20

Prov

isio

nsPr

ovis

ions

are

reco

gnis

edwh

enth

eG

roup

/Com

pany

has

ale

galo

blig

atio

nor

irrev

ocab

leco

mm

itmen

tas

are

sult

ofpa

stev

ent,

itis

prob

able

that

anou

tflow

ofre

sour

ces

embo

dyin

gec

onom

icbe

nefit

swi

llbe

requ

ired

tose

ttle

the

oblig

atio

nan

da

relia

ble

estim

ate

can

bem

ade

ofth

eam

ount

ofth

eob

ligat

ion.

Whe

nth

eG

roup

/Com

pany

expe

cts

that

prov

isio

nam

ount

inpa

rtor

infu

llwi

llbe

com

pens

ated

,e.g

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ract

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the

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ount

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rthe

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ract

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ron

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sco

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pres

ent

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and

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rting

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em

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red

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lue

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gth

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fect

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tere

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tem

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Rev

enue

and

expe

nse

reco

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even

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dto

the

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ntth

atit

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roup

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pany

and

the

amou

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reve

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can

bere

liabl

ym

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enue

ism

easu

red

atth

efa

irva

lue

ofth

eco

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erat

ion

rece

ived

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ceiv

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good

sor

serv

ices,

neto

fval

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and

disc

ount

s.

Rev

enue

from

sale

ofel

ectri

city

toen

dcu

stom

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dist

ribut

ion,

supp

ly,pu

blic

serv

ice

oblig

atio

ns(P

SO)a

ndot

hers

ervic

esre

nder

edin

the

proc

ess

ofsa

leof

elec

tricit

yto

end

cust

omer

s.Th

epr

ices

oftra

nsm

issio

n,di

strib

utio

nan

dPS

Ose

rvic

espr

ovid

edby

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upco

mpa

nies

are

regu

late

dby

the

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nalC

omm

issio

nfo

rEne

rgy

Con

trola

ndPr

ices

.R

even

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mel

ectri

city

sale

sto

hous

ehol

dcu

stom

ers

isre

cogn

ised

when

elec

trici

tyis

supp

lied

and

paym

entf

orit

ism

ade.

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timat

eof

accr

ued

reve

nue

ism

ade

tore

cord

elec

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tysu

pplie

dbu

tnot

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ecla

red

byho

useh

old

cust

omer

sat

the

end

ofea

chre

porti

ngpe

riod.

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estim

ate

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sed

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stor

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xper

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ean

dav

erag

epa

ymen

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elec

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ype

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byth

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stom

ers.

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enue

from

elec

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ysa

les

tobu

sine

sscu

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ers

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ised

when

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yis

supp

lied

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don

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nsum

ptio

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elec

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tywh

ich

isde

term

ined

with

refe

renc

eto

met

erre

adin

gs.

Reg

ulat

ion

ofta

riffs

and

prof

itabi

lity

Prof

itabi

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divi

dual

Gro

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ivid

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lC

ontro

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miss

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forP

rices

and

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ese

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oved

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xtpe

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.Th

ele

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ich

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the

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sts

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ities

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arm

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me

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ew

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fect

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sets

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lities

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ted

activ

ities

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nded

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imin

ate

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ided

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llbe

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inth

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ture

.

F-104

245496 Olive pp138-imp 27/06/2017 09:22 Page 104

88AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Summaryof

significanta

ccou

ntingpo

licies

Tarif

fsfo

rele

ctric

ityan

dga

sdi

strib

utio

nar

ere

gula

ted

byth

eC

omm

issi

onby

esta

blish

ing

the

pric

eca

ps.T

hesp

ecific

pric

esfo

rthe

dist

ribut

ion

serv

ices

are

esta

blish

edby

the

Gro

upco

mpa

ny,w

hich

isa

dist

ribut

ion

netw

ork

oper

ator

,with

inth

elim

itsap

prov

edby

the

Com

miss

ion.

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ofliq

uefie

dga

sto

regu

late

dco

nsum

ers

isre

gula

ted

thro

ugh

setti

ngth

esa

lepr

ices.

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fsfo

rele

ctric

itytra

nsm

issio

nan

dPS

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rvic

esar

ere

gula

ted

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eCo

mm

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nby

esta

blish

ing

the

cap

price

sfo

rthe

serv

ices

.The

spec

ificpr

ices

and

tarif

fsfo

rthe

trans

mis

sion

and

PSO

serv

ices

are

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blish

edby

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ice

prov

ider

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tpar

toft

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and

with

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prov

edby

the

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mis

sion

.Ta

riffs

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ectri

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oduc

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pend

ents

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aswe

llas

tarif

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acity

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rve

serv

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egul

ated

,exc

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hen

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ucer

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ore

than

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oced

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hed

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mm

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n.Ta

riffs

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rtan

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port

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are

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ated

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enue

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nof

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ices

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ing

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ices

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upea

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and

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pens

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ublic

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atio

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ased

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ices

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ata

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tes

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ligat

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fees

).PS

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ucer

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icse

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atio

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hem

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sed

onpr

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term

ined

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alqu

antit

ies

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ices

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yth

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n.Th

eta

riffi

ses

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ished

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mm

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edby

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utio

nne

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cts

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user

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ished

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rsth

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esto

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ytra

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ator

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ich

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up),

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ble

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tion

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Ose

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ectri

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ich

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ral

loca

ted

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ectri

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ucer

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atdo

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up,a

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ised

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don

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ount

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umed

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ted

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ectri

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uctio

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ised

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ble

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ade

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.Th

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nap

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ount

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rting

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edi

ffere

nce

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idto

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ator

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seco

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nce

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ued

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ount

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ator

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ount

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enue

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lyof

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as

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talc

osts

arisi

ngfro

mev

ents

occu

rring

subs

eque

ntto

the

deliv

ery

ofgo

ods

toth

e

F-105

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89AN

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CIAL

STAT

EMEN

TS2015

|Summaryof

significanta

ccou

ntingpo

licies

carri

eror

toth

eag

reed

plac

eof

dest

inat

ion,

are

trans

ferre

dfro

mth

eG

roup

toa

buye

run

der

the

stan

dard

sale

term

s(IN

CO

TERM

S)ag

reed

with

the

buye

r,an

dth

ere

cove

rabi

lity

ofth

ere

late

dam

ount

sre

ceiv

able

isre

ason

ably

certa

in.

Inte

rest

inco

me

Inte

rest

inco

me

isre

cogn

ised

onac

crua

lbas

isus

ing

the

effe

ctiv

ein

tere

stra

tem

etho

d.Fo

rth

epu

rpos

eof

the

cash

flow

stat

emen

t,in

tere

stre

ceive

dis

attri

bute

dto

inve

stin

gac

tiviti

es,w

here

asfo

rth

epu

rpos

eof

the

stat

emen

tofc

ompr

ehen

sive

inco

me,

inte

rest

rece

ived

isre

cogn

ised

asfin

ance

inco

me.

Div

iden

din

com

e

esta

blish

ed.

Div

iden

dsre

ceive

dar

eat

tribu

ted

toin

vest

ing

activ

ities

inth

est

atem

ento

fcas

hflo

ws.

Div

iden

dsof

subs

idia

ries,

attri

buta

ble

toth

epa

rent

com

pany

,ar

eel

imin

ated

inth

eco

nsol

idat

edfin

anci

alst

atem

ents

.

Leas

ein

com

eLe

ase

inco

me

isre

cogn

ised

ona

prop

ortio

nate

basis

over

the

leas

epe

riod.

Expe

nse

reco

gniti

onEx

pens

esar

ere

cogn

ised

inth

est

atem

ent

ofco

mpr

ehen

sive

inco

me

asin

curre

dby

the

accr

ual

met

hod.

2.22

Emis

sion

allo

wanc

esBa

sed

onth

eEU

Dire

ctive

2003

/07/

EC,t

hegr

eenh

ouse

gase

miss

ions

tradi

ngsc

hem

ewa

sde

velo

ped

whic

hca

me

into

forc

eon

1Ja

nuar

y20

05.

The

first

perio

dof

oper

atio

nof

this

sche

me

cove

red

3ye

ars

from

2005

to20

07;t

hese

cond

perio

dco

vere

d5

year

sfro

m20

08to

2012

,and

the

third

perio

dco

vers

the

Kyot

oAg

reem

ent.

The

syst

emfu

nctio

nson

'cap'

and

'trad

e'ba

sis.

The

gove

rnm

ents

ofth

eEU

Mem

berS

tate

sar

ere

quire

dto

setc

aps

fore

ach

emiss

ion

unit

inth

esc

hem

ean

dfo

rthe

perio

dof

impl

emen

tatio

n.Th

ese

caps

are

spec

ified

inth

eN

atio

nalA

lloca

tion

Plan

tobe

deve

lope

dby

are

spon

sibl

eau

thor

ityof

each

Mem

berS

tate

(inLi

thua

nia

the

Min

istry

ofEn

viro

nmen

t).Th

eN

atio

nal

Allo

catio

nPl

ande

term

ines

the

annu

alem

issio

nam

ount

(mea

sure

das

tons

ofca

rbon

diox

ide

equi

vale

nt)f

orea

chem

issio

nun

itan

dea

chpe

riod

and

allo

cate

san

nual

emiss

ion

allo

wanc

es.

Entit

ies

invo

lved

inth

etra

ding

sche

me

ofem

issio

nal

lowa

nces

are

entit

led

thro

ugho

utth

epe

riod

from

2008

to20

20to

use

emis

sion

redu

ctio

nun

itsth

atar

eac

cept

edin

the

EUtra

ding

sche

me

ofem

issio

nal

lowa

nces

,but

noti

nex

cess

of20

%of

tota

lqua

ntity

ofem

issio

nal

lowa

nces

allo

cate

dto

them

durin

gth

epe

riod

from

2008

to20

12.

AM

embe

rSta

teha

san

oblig

atio

nto

allo

cate

emis

sion

allo

wanc

esby

28Fe

brua

ryof

each

year

inac

cord

ance

with

the

Nat

iona

lAllo

catio

nPl

an(a

part

ofem

issio

nal

lowa

nces

are

seta

side

forn

ewun

its).

amou

ntof

gree

nhou

sega

sem

issio

nsdu

ring

the

curre

ntca

lend

arye

arno

tlat

erth

anby

30Ap

rilof

the

next

year

.

Inta

ngib

leas

sets

The

EUem

issi

onal

lowa

nces

are

treat

edas

inta

ngib

leas

sets

that

were

prov

ided

byth

est

ate

orac

quire

dby

anen

tity

inth

efo

rmof

non-

mon

etar

ygr

anta

ndth

atsh

ould

beac

coun

ted

fora

tfai

rval

ueat

the

mom

ento

fthe

iris

suan

ceor

trans

fer.

Afte

rth

ein

itialr

ecog

nitio

nem

issio

nal

lowa

nces

are

reva

lued

atfa

irva

lue

usin

gth

eac

tive

mar

ket

pric

es.

Incr

ease

sin

the

carry

ing

amou

ntar

ising

onth

ere

valu

atio

nof

emiss

ion

allo

wanc

esar

epr

esen

ted

inot

herc

ompr

ehen

sive

inco

me

and

cred

ited

agai

nstr

eval

uatio

nre

serv

edi

rect

lyto

equi

tyan

dde

crea

ses

inex

cess

ofth

epr

evio

usly

accu

mul

ated

amou

ntin

the

reva

luat

ion

rese

rve

are

reco

gnis

edin

the

prof

itor

loss

inth

est

atem

ento

fcom

preh

ensi

vein

com

e.O

nre

alisa

tion

ofem

issio

nal

lowa

nces

,the

resp

ectiv

epo

sitiv

eba

lanc

eof

the

reva

luat

ion

rese

rve

ista

ken

dire

ctly

tore

tain

edea

rnin

gs.

Gov

ernm

entg

rant

The

EUem

issio

nal

lowa

nces

prov

ided

toth

eG

roup

atno

cons

ider

atio

nar

etre

ated

asa

non-

mon

etar

ygo

vern

men

tgra

ntwh

ich

isre

cogn

ised

atfa

irva

lue

atth

eda

teof

itsre

ceip

tori

ssua

nce.

Subs

eque

ntly,

the

gove

rnm

entg

rant

isre

cogn

ised

asin

com

ein

prop

ortio

nto

emis

sion

allo

wanc

esut

ilised

durin

gth

eva

lidity

perio

dof

emiss

ion

allo

wanc

esor

upon

thei

rdisp

osal

.

Prov

isio

nfo

rthe

utilis

atio

nof

emis

sion

allo

wan

ces

Asth

eG

roup

mak

esem

issio

ns,a

liabi

lityar

ises

topa

yfo

rthe

seem

issio

nsto

the

stat

eus

ing

emiss

ion

allo

wanc

es,

the

nom

inal

valu

eof

whic

his

equa

lto

the

quan

tity

ofem

issi

ons.

Such

liabi

lityis

apr

ovis

ion

whic

his

estim

ated

ata

valu

eeq

ualt

oex

pens

esto

bein

curre

dby

the

Gro

upfo

rth

ese

ttlem

ento

flia

bility

atfin

ancia

lrep

ortin

gda

te.

The

liabi

lity

can

beof

fset

agai

nsti

ntan

gibl

eas

sets

only

when

the

actu

alqu

antit

yof

emis

sion

sis

appr

oved

byan

appr

opria

tere

gula

tory

stat

eau

thor

ity.

Cha

nges

inth

eva

lue

oflia

bility

are

reco

gnis

edin

the

stat

emen

tofc

ompr

ehen

sive

inco

me.

Lend

ing

ofem

issi

onal

low

ance

sLe

ndin

gof

emiss

ion

allo

wanc

esis

asa

letra

nsac

tion

durin

gwh

ich

asse

tsis

disp

osed

and

the

right

tore

ceiv

eem

issio

nal

lowa

nces

isac

quire

d.Th

erig

htto

rece

ive

emiss

ion

allo

wanc

esis

reco

gnis

edas

othe

rnon

-cur

rent

asse

ts.S

uch

asse

tsar

ein

itial

lyre

cogn

ised

atac

quis

ition

cost

,and

subs

eque

ntly

such

asse

tsar

ete

sted

fori

mpa

irmen

tas

desc

ribed

inN

ote

2.8.

2.23

Leas

esTh

ede

term

inat

ion

ofwh

ethe

ran

arra

ngem

enti

s,or

cont

ains

ale

ase

isba

sed

onth

esu

bsta

nce

ofth

ear

rang

emen

tati

ncep

tion

date

ofwh

ethe

rthe

fulfil

men

toft

hear

rang

emen

tis

depe

nden

ton

the

use

ofa

spec

ificas

seto

rass

ets

orth

ear

rang

emen

tcon

veys

arig

htto

use

the

asse

t.Le

ases

wher

esu

bsta

ntia

llyal

lthe

risks

and

rewa

rds

ofow

ners

hip

ofas

sets

leas

edar

etra

nsfe

rred

toth

ele

ssee

are

class

ified

asfin

ance

leas

e.An

oper

atin

gle

ase

isa

leas

eot

hert

han

afin

ance

leas

e.

Whe

reth

eC

ompa

nyan

d(o

r)th

eG

roup

are

less

ors

Ope

ratin

gle

ase

inco

me

isre

cogn

ised

ona

stra

ight

-line

basi

sov

erth

ele

ase

term

.In

itial

dire

ctco

sts

are

adde

dto

the

carry

ing

amou

ntof

the

asse

tlea

sed

and

reco

gnise

dov

erth

ele

ase

term

simila

rlyas

leas

ein

com

e.

F-106

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90AN

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STAT

EMEN

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|Summaryof

significanta

ccou

ntingpo

licies

Whe

reth

eC

ompa

nyan

d(o

r)th

eG

roup

are

less

ees

Fina

nce

leas

esar

eca

pita

lised

atth

eco

mm

ence

men

toft

hele

ase

atth

elo

wero

fthe

fair

valu

eof

the

prop

erty

leas

edan

dat

the

pres

entv

alue

ofth

em

inim

umle

ase

paym

ents

.R

espe

ctiv

efin

ance

leas

elia

bilit

yis

reco

rded

inth

eba

lanc

esh

eet.

Leas

epa

ymen

tsar

eap

porti

oned

betw

een

the

finan

cech

arge

and

the

redu

ctio

nof

the

outs

tand

ing

liabi

lityso

asto

prod

uce

aco

nsta

ntra

teof

inte

rest

onth

eou

tsta

ndin

gba

lanc

eof

the

liabi

lity.F

inan

cech

arge

sar

ech

arge

dto

the

stat

emen

tofc

ompr

ehen

sive

inco

me.

Paym

ents

mad

eun

dero

pera

ting

leas

esar

ech

arge

dto

the

stat

emen

tofc

ompr

ehen

sive

inco

me

ona

stra

ight

-line

basi

sov

erth

epe

riod

ofth

ele

ase.

Fina

ncia

llea

seA

finan

cele

ase

isa

leas

ewh

ereb

ya

com

pany

(ale

ssee

)pay

sth

eto

talp

rice

ofth

eas

seta

ndin

tere

stov

erth

ele

ase

term

and

usua

llybe

com

esth

eow

nero

fthe

asse

tatt

heen

dof

the

leas

ete

rm.F

ollo

wing

the

trans

fero

fthe

asse

tto

the

less

eeun

dert

hele

ase

cont

ract

,the

less

orre

cord

sam

ount

sre

ceiv

able

afte

rone

year

atth

eam

ount

which

iseq

ualt

one

tinv

estm

enti

nfin

ance

leas

e.Th

eam

ount

equa

lto

neti

nves

tmen

tin

finan

cele

ase

issh

own

asno

n-cu

rrent

finan

ciala

sset

s.At

the

end

ofth

ere

porti

ngpe

riod

long

-term

debt

sto

beco

vere

dwi

thin

one

year

are

recla

ssifie

dto

curre

ntam

ount

sre

ceiv

able

.Am

ount

sre

ceiv

able

byth

ele

ssor

shou

ldbe

mea

sure

dat

the

end

ofth

ere

porti

ngpe

riods

and

ifne

cess

ary

redu

ced

byth

eam

ount

sof

doub

tfula

mou

nts

rece

ivabl

e.As

sets

acqu

ired

unde

rfin

ance

leas

esar

ede

prec

iate

dov

erth

ees

timat

edus

eful

lives

ofas

sets

.Ift

heG

roup

does

noti

nten

dto

exer

cise

the

optio

nto

acqu

ireth

eas

setl

ease

dat

the

end

ofth

ele

ase

term

,th

eas

seti

sde

prec

iate

dov

erth

esh

orte

roft

heus

eful

life

ofth

eas

seta

ndth

ele

ase

term

.

2.24

Gra

nts

and

subs

idie

s

Asse

t-rel

ated

gran

tsG

over

nmen

tand

the

EUas

set-r

elat

edgr

ants

com

pris

egr

ants

rece

ived

inth

efo

rmof

non-

curre

ntas

sets

orin

tend

edfo

rthe

acqu

isitio

nof

non-

curre

ntas

sets

.G

rant

sar

ein

itially

reco

rded

atth

efa

irva

lue

ofth

eas

setr

ecei

ved

and

subs

eque

ntly

reco

gnise

din

the

stat

emen

tofc

ompr

ehen

sive

inco

me

byre

duci

ngth

ede

prec

iatio

nch

arge

ofth

ere

late

das

seto

vert

heex

pect

edus

eful

lifeof

the

asse

t.U

pon

the

reva

luat

ion

ofno

n-cu

rrent

asse

tsgr

ants

rela

ted

tono

n-cu

rrent

asse

tsin

resp

ecto

fwhi

chim

pairm

entw

asre

cogn

ised

onre

valu

atio

nar

ewr

itten

off.

Inco

me-

rela

ted

gran

tsG

over

nmen

tan

dth

eEu

rope

anU

nion

gran

tsre

ceive

das

aco

mpe

nsat

ion

for

the

expe

nses

orun

earn

edin

com

eof

the

curre

ntor

prev

ious

repo

rting

perio

d,al

so,a

llthe

gran

ts,w

hich

are

notg

rant

sre

late

dto

asse

ts,

are

cons

ider

edas

gran

tsre

late

dto

inco

me.

The

inco

me-

rela

ted

gran

tsar

ere

cogn

ised

asus

edin

parts

toth

eex

tent

ofth

eex

pens

esin

curre

ddu

ring

the

repo

rting

perio

dor

unea

rned

inco

me

tobe

com

pens

ated

byth

atgr

ant.

Thes

egr

ants

are

pres

ente

din

the

stat

emen

tof

com

preh

ensi

vein

com

e,le

ssre

late

dex

pens

es.

Paym

ents

mad

eby

user

sfo

rth

eco

nnec

tion

toth

eG

roup

'sga

ssy

stem

are

reco

rded

asde

ferre

din

com

ean

dre

cogn

ised

asin

com

eov

erth

ede

prec

iatio

npe

riod

ofth

eca

pita

lised

asse

tsco

ncer

ned.

Such

inco

me

issh

own

inth

elin

eite

m'S

ales

reve

nue'

ofth

ein

com

est

atem

ent.

2.25

Div

iden

ddi

strib

utio

n

shar

ehol

ders

.

2.26

Con

tinge

ncie

sC

ontin

gent

liabi

litie

sar

eno

trec

ogni

sed

inth

efin

ancia

lsta

tem

ents

.The

yar

edi

sclo

sed

unle

ssth

epo

ssib

ility

ofan

outfl

owof

reso

urce

sem

body

ing

econ

omic

bene

fits

isre

mot

e.A

cont

inge

ntas

setis

notr

ecog

nise

din

the

finan

cial

stat

emen

tsbu

tdisc

lose

dwh

enan

inflo

wof

inco

me

orec

onom

icbe

nefit

sis

prob

able

.

2.27

Even

tsaf

tert

here

porti

ngpe

riod

Alle

vent

saf

tert

here

porti

ngpe

riod

(adj

ustin

gev

ents

)are

acco

unte

dfo

rin

the

finan

cial

stat

emen

tspr

ovid

edth

atth

eyar

ere

late

dto

the

repo

rting

perio

dan

dha

vea

signi

fican

tim

pact

onth

efin

anci

alst

atem

ents

.Eve

nts

afte

rth

ere

porti

ngpe

riod

that

are

sign

ifican

tbut

are

nota

djus

ting

even

tsar

edi

sclo

sed

inth

eno

tes

toth

efin

anci

alst

atem

ents

.

2.28

Rel

ated

parti

esR

elat

edpa

rties

are

defin

edas

shar

ehol

ders

,Bo

ard

mem

bers

,the

ircl

ose

fam

ilym

embe

rs,s

tate

-ow

ned

ente

rpris

esan

dco

mpa

nies

that

dire

ctly

orin

dire

ctly

(thro

ugh

the

inte

rmed

iary

)co

ntro

lthe

Gro

upor

are

cont

rolle

dby

,ora

reun

derc

omm

onco

ntro

lwith

the

Gro

up,p

rovi

ded

such

rela

tions

hip

empo

wers

one

ofth

epa

rties

toex

erci

seco

ntro

lors

igni

fican

tinf

luen

ceov

erth

eot

herp

arty

inm

akin

gfin

anci

alan

dop

erat

ing

decis

ions

.

2.29

Inte

r-com

pany

offs

ettin

gW

hen

prep

arin

gth

efin

anci

alst

atem

ents

,ass

ets

and

liabi

lities

,as

well

asre

venu

ean

dex

pens

esar

eno

tset

off,

exce

ptth

eca

ses

when

ace

rtain

IFR

Ssp

ecific

ally

requ

ires

such

set-o

ff.

2.30

Fair

valu

eFa

irva

lue

isde

fined

asth

epr

iceth

atwo

uld

bere

ceiv

edto

sella

nas

seto

rpai

dto

trans

fera

liabi

lityin

anor

derly

trans

actio

nbe

twee

nm

arke

tpar

ticip

ants

atth

em

easu

rem

entd

ate.

Ther

ear

eth

ree

leve

lsin

the

fair

valu

ehi

erar

chy:

Leve

l1:f

airv

alue

ofas

sets

isba

sed

onqu

oted

price

s(u

nadj

uste

d)in

activ

em

arke

tsfo

rid

entic

alas

sets

orlia

biliti

es.

Leve

l2:f

airv

alue

ofas

sets

isba

sed

onot

hero

bser

vabl

em

arke

tdat

a,di

rect

lyor

indi

rect

ly.Le

vel3

:fai

rval

ueof

asse

tsis

base

don

non-

obse

rvab

lem

arke

tdat

a.

F-107

245496 Olive pp138-imp 27/06/2017 09:22 Page 107

91AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Financialrisk

managem

ent

3Fi

nanc

ialr

iskm

anag

emen

t3.

1Fi

nanc

ialr

iskfa

ctor

sTh

eG

roup

and

the

Com

pany

are

expo

sed

toa

varie

tyof

finan

cial

risks

inth

eiro

pera

tions

:mar

ketr

isk(in

clud

ing

fore

ign

exch

ange

risk,

inte

rest

rate

risk

inre

latio

nto

cash

flows

),cr

edit

risk

and

liqui

dity

risk.

Inm

anag

ing

thes

eris

ksth

eG

roup

com

pani

esse

ekto

mitig

ate

the

impa

ctof

fact

ors

whic

hco

uld

.

Mar

ketr

isk

Fore

ign

exch

ange

risk

Asfro

m1

Janu

ary2

015,

Lith

uani

aad

opte

deu

roas

itsof

ficia

lcur

renc

y.an

dsa

les

are

mos

tlyde

nom

inat

edin

euro

s.Tr

ansa

ctio

nsde

nom

inat

edin

othe

rcur

renc

ies

(USD

)are

insi

gnific

anta

tthe

Gro

uple

vel.

In20

15,t

heG

roup

com

pani

esus

edde

rivat

ive

finan

cial

inst

rum

ents

inte

nded

tom

anag

eth

efo

reig

nex

chan

geris

k.Th

ese

inst

rum

ents

,how

ever

,wer

eex

pire

dat

the

end

of20

15,a

ndno

new

inst

rum

ents

were

used

.

Inte

rest

rate

risk

o has

finan

cial

asse

tsm

easu

red

atfa

irva

lue

with

fixed

inte

rest

rate

s,th

eref

ore,

itis

expo

sed

tofa

irva

lue

inte

rest

rate

risk.

Tim

ede

posi

tsbe

arfix

edin

tere

stra

te,t

here

fore

,the

yar

eno

taffe

cted

byin

tere

stra

teris

k.

inte

rest

rate

s.

Gro

up

Incre

ase/d

ecre

ase

inp

erc

en

tag

ep

oin

ts(D

ecre

ase)/

incre

ase

inp

rofi

t

2015

+0.3

/-0.3

(42)

/42

2014

+0.5

/-0.5

(65)

/65

Co

mp

an

yIn

cre

ase/d

ecre

ase

inp

erc

en

tag

ep

oin

ts(D

ecre

ase)/

incre

ase

inp

rofi

t

2015

+0.3

/-0.3

51/(5

1)20

14+0

.5/-0

.511

5/(1

15)

Fair

valu

esof

finan

ciali

nstru

men

ts-fo

r-sal

e

3)ar

em

easu

red

atfa

irva

lue.

Allo

ther

finan

cial

asse

tsan

dfin

anci

allia

bilit

ies

are

reco

gnis

edin

itially

atco

stan

dsu

bseq

uent

lym

easu

red

atam

ortis

edco

st,l

ess

impa

irmen

tlos

s.

Fair

valu

eis

defin

edas

the

price

that

woul

dbe

rece

ived

tose

llan

asse

torp

aid

totra

nsfe

ralia

bility

inan

orde

rlytra

nsac

tion

betw

een

mar

ketp

artic

ipan

tsat

the

mea

sure

men

tdat

e.Fa

irva

lue

isde

term

ined

onth

eba

sis

ofqu

oted

mar

ketp

rices

,disc

ount

edca

shflo

wm

odel

san

dop

tion

prici

ngm

odel

sas

appr

opria

te.

iall

iabi

lities

appr

oxim

ated

thei

rfa

irva

lue

exce

ptfo

rm

ortg

age

loan

sgr

ante

d(s

eeN

ote

10),

borro

wing

sof

the

Gro

upco

mpa

nyLi

etuv

osEn

ergi

jos

Gam

yba

AB(s

eeN

ote

19)a

ndam

ount

sre

ceiv

able

ondi

spos

alof

Litg

ridAB

.

Asat

31D

ecem

ber2

015,

the

carry

ing

amou

ntof

the

Gro

up's

and

the

Com

pany

'sam

ount

sre

ceiva

ble

ondi

spos

alof

Litg

ridAB

(see

Note

10)w

aseq

ualt

oEU

R23

8,97

5th

ousa

nd(3

1D

ecem

ber2

014:

EUR

238,

975

thou

sand

),an

dth

efa

irva

lue

amou

nted

toap

prox

.EU

R24

7,35

0th

ousa

nd(3

1D

ecem

ber2

014:

EUR

241,

350

thou

sand

).Th

efa

irva

lue

was

dete

rmin

edon

the

basis

ofdi

scou

nted

cash

flows

usin

g1.

00%

(31

Dec

embe

r201

4:1.

40%

)disc

ount

rate

.The

irfa

irva

lue

isat

tribu

ted

toLe

vel3

inth

efa

irva

lue

hier

arch

y.

The

follo

wing

met

hods

and

assu

mpt

ions

are

used

toes

timat

eth

efa

irva

lue

ofea

chcl

ass

offin

anci

alin

stru

men

ts:

a)Th

eca

rryin

gam

ount

ofcu

rrent

trade

and

othe

rrec

eiva

bles

,cur

rent

trade

and

othe

rpay

able

san

dcu

rrent

inte

rest

-bea

ring

borro

wing

sap

prox

imat

esth

eirf

airv

alue

.

b)Th

efa

irva

lue

ofno

n-cu

rrent

inte

rest

-bea

ring

borro

wing

s(in

cludi

ngcu

rrent

and

non-

curre

ntpo

rtion

)is

estim

ated

bydi

scou

ntin

gco

ntra

ctua

lfut

ure

cash

flows

atin

tere

stra

tees

tabl

ished

base

don

the

quot

edm

arke

tpric

efo

rthe

sam

eor

simila

rloa

nsor

onth

ecu

rrent

rate

sav

aila

ble

ford

ebtw

ithth

esa

me

mat

urity

prof

ile.T

hefa

irva

lue

ofth

em

entio

ned

borro

wing

s,ex

cept

form

ortg

age

loan

s(s

eeN

ote

10),

borro

wing

sof

Liet

uvos

Ener

gijo

sG

amyb

aAB

(see

Not

e19

)and

amou

nts

rece

ivab

lefro

mLi

tgrid

AB,a

ppro

ximat

esth

eirc

arry

ing

amou

nts.

Cre

ditr

isk

com

pani

es(tr

ade

and

othe

ram

ount

sre

ceiv

able

)an

dfro

mfin

anci

ngac

tivitie

s(c

ash

and

cash

equi

vale

nts,

time

depo

sits

,loa

nsgr

ante

d).

The

Gro

upis

note

xpos

edto

sign

ifican

tcre

ditr

iskco

ncen

tratio

nre

late

dto

trade

rece

ivabl

esan

dot

her

amou

nts

rece

ivabl

e.Pr

inci

pally

allt

rade

rece

ivabl

esan

dot

hera

mou

nts

rece

ivab

leof

the

Com

pany

are

due

from

rela

ted

parti

es(s

eeN

ote

37).

Loan

sgr

ante

dof

the

Com

pany

and

the

Gro

uppr

inci

pally

cons

istof

the

loan

gran

ted

toEP

SO-G

(see

Not

e37

).

The

Gro

upan

dth

eCo

mpa

nyte

mpo

raril

yin

vest

free

liqui

dfu

nds

only

inlo

w-ris

km

oney

mar

ket

inst

rum

ents

and

debt

secu

ritie

s,i.e

.tim

ede

posi

ts,d

eben

ture

s,Li

thua

nian

gove

rnm

entb

onds

.The

fund

san

dm

axim

isere

turn

onin

vest

men

tsin

purs

uanc

eof

this

obje

ctive

.R

iskof

coun

terp

artie

sde

faul

ting

ism

anag

edby

ente

ring

into

trans

actio

nswi

thre

liabl

efin

anci

alin

stitu

tions

with

alo

ng-te

rm

F-108

245496 Olive pp138-imp 27/06/2017 09:22 Page 108

92AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Financialrisk

managem

ent

-an

equi

vale

ntra

ting

ofot

herr

atin

gag

enci

es).

The

cred

itris

kon

cash

inba

nks

islim

ited

beca

use

the

Gro

upan

dth

eCo

mpa

nyco

nduc

ttra

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tions

with

the

bank

swi

thhi

ghcr

edit

ratin

gsas

sign

edby

inte

rnat

iona

lcre

ditr

atin

gag

encie

s.Th

eG

roup

and

the

Com

pany

hold

cash

bala

nces

and

time

depo

sits

inac

coun

tsof

the

maj

orba

nks

inLi

thua

nia

assi

gned

with

alo

ng-

-Fi

tch

Rat

ings

.

The

max

imum

expo

sure

tocr

edit

risk

asat

31De

cem

ber2

015

and

31D

ecem

ber2

014

was

equa

lto

the

carry

ing

amou

ntof

finan

cial

asse

ts.

Gro

up

Co

mp

an

y

2015

2014

2015

2014

Tra

de

an

do

ther

am

ou

nts

receiv

ab

le:

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ean

dot

herr

ecei

vabl

es12

5,87

815

1,59

74,

549

1,60

2Lo

ans

gran

ted

and

rece

ivabl

es23

9,70

723

9,76

123

8,97

523

8,97

4A

vail

ab

le-f

or-

sale

fin

an

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lassets

:

Avai

labl

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r-sal

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sets

4,54

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711

4,56

14,

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han

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s16

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121

1,01

913

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ota

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mm

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en

ts:

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issue

d67

,430

73,6

4567

,430

73,6

45T

ota

l67,4

30

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45

67,4

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45

Liqu

idity

risk

The

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dity

risk

ism

anag

edby

plan

ning

futu

reca

shflo

wsof

each

Gro

upco

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den

surin

gsu

fficie

ntca

shan

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aila

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ndin

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mm

itted

cred

itfa

ciliti

esan

dov

erdr

afts

tosu

ppor

tth

eiro

pera

ting

activ

ities.

The

refin

anci

ngris

kis

man

aged

byen

surin

gth

atbo

rrowi

ngs

over

ace

rtain

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dwe

rere

paid

from

avai

labl

eca

sh,f

rom

cash

flows

expe

cted

from

oper

atin

gac

tivitie

sof

the

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upco

mpa

nies

over

that

perio

d,an

dfro

mun

with

draw

nco

mm

itted

cred

itfa

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eswh

ich

have

tobe

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idin

late

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iods

.

quic

kra

tio((t

otal

curre

ntas

sets

inve

ntor

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/tot

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lities

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e1.

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94,r

espe

ctiv

ely

(31

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embe

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espe

ctive

ly)

The

guar

ante

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ante

dby

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pany

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TGAS

UAB

,whi

chwa

sin

tend

edto

serv

eas

ase

curit

yun

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edit

facil

ityag

reem

ents

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edby

LITG

ASU

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thth

ecr

edit

inst

itutio

nsan

dun

dert

helo

ng-te

rmliq

uefie

dna

tura

lgas

(LN

G)p

urch

ase

agre

emen

tssig

ned

with

the

LNG

supp

liers

,exp

ired

on23

Febr

uary

2016

.

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up

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mp

an

y

2015

2014

2015

2014

Am

ou

nts

pa

yab

lem

easu

red

at

am

ort

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co

st

Borro

wing

san

dfin

ance

leas

elia

bilit

ies

420,

688

391,

607

--

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epa

yabl

es(N

ote

25)a

ndno

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rrent

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nts

paya

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(Not

e24

)93

,648

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788

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9518

8O

ther

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35,5

4532

,147

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red

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-17,8

19

-

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tal

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81

567,5

42

64,1

75

495

F-109

245496 Olive pp138-imp 27/06/2017 09:22 Page 109

93AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Criticalaccou

ntingestim

ates

andjudgem

entsused

inthepreparationof

thefin

ancialstatem

ents

unde

rth

eco

ntra

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495

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3.2

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Law

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roup

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com

plie

dwi

thth

ese

requ

irem

ents

.The

latte

rcom

pany

has

obta

ined

aco

nfirm

atio

nfro

mLi

etuv

osEn

ergi

jaUA

Bce

rtify

ing

that

finan

cial

supp

ortw

illbe

prov

ided

forn

otle

ssth

an12

mon

ths

afte

rthe

appr

oval

ofits

finan

cial

stat

emen

ts.

Whe

nm

anag

ing

the

capi

talr

isk,t

heG

roup

com

pani

esse

ekto

mai

ntai

nan

optim

alca

pita

lstru

ctur

ein

alo

ngru

nto

ensu

rea

cons

isten

tim

plem

enta

tion

ofca

pita

lcos

tand

risk

min

imis

atio

nob

ject

ives

.Th

eG

roup

com

pani

esfo

rmth

eirc

apita

lstru

ctur

ein

view

ofin

tern

alfa

ctor

sre

latin

gto

oper

atin

gac

tivitie

s,th

eex

pect

edca

pita

lexp

endi

ture

san

dde

velo

pmen

tsan

din

view

ofbu

sine

ssst

rate

gyof

the

Gro

upco

mpa

nies

,as

well

asba

sed

onex

tern

alcu

rrent

orex

pect

edfa

ctor

ssi

gnific

antt

oop

erat

ions

rela

ting

tom

arke

ts,r

egul

atio

nan

dlo

cale

cono

mic

situa

tion.

4C

ritic

alac

coun

ting

estim

ates

and

judg

emen

tsus

edin

the

prep

arat

ion

ofth

efin

ancia

lsta

tem

ents

Estim

ates

and

judg

emen

tsar

eco

ntin

ually

eval

uate

dan

dar

eba

sed

onhi

stor

icale

xper

ienc

ean

dot

her

fact

ors,

incl

udin

gex

pect

atio

nsof

futu

reev

ents

that

are

belie

ved

tobe

reas

onab

leun

der

the

circ

umst

ance

s.

The

prep

arat

ion

offin

anci

alst

atem

ents

acco

rdin

gto

Inte

rnat

iona

lFin

anci

alRe

porti

ngSt

anda

rds

asad

opte

dby

the

Euro

pean

Uni

onre

quire

sm

anag

emen

tto

mak

ees

timat

esan

das

sum

ptio

nsth

ataf

fect

the

repo

rted

amou

nts

ofas

sets

,lia

biliti

es,

inco

me

and

cost

san

dco

ntin

genc

ies.

Cha

nge

inth

eun

derly

ing

assu

mpt

ions

,est

imat

esan

dju

dgem

ents

may

have

am

ater

iale

ffect

onth

ese

cons

olid

ated

finan

cial

stat

emen

tsof

the

Gro

upan

dst

and-

alon

efin

anci

alst

atem

ents

ofth

eC

ompa

ny.

F-110

245496 Olive pp138-imp 27/06/2017 09:22 Page 110

94AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Criticalaccou

ntingestim

ates

andjudgem

entsused

inthepreparationof

thefin

ancialstatem

ents

Rev

alua

tion

and

impa

irmen

tofa

sset

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eG

roup

acco

unts

for

prop

erty

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ant

and

equi

pmen

t(e

xcep

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ras

sets

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wer

plan

ts,

gas

dist

ribut

ion

pipe

lines

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ste

chno

logi

cal

equi

pmen

tan

dIT

and

tele

com

mun

icatio

neq

uipm

ent)

at

Rev

alua

tion

ofas

sets

ofsu

bsid

iarie

s,ex

cept

forL

ESTO

AB,a

ndfa

irva

lue

mea

sure

men

t

Asat

31D

ecem

ber2

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anin

depe

nden

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uatio

nat

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uple

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asca

rried

outi

nre

spec

tof

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uvos

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osAB

(bui

ldin

gs),

Kaun

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erge

tikos

Rem

onta

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dN

TVa

ldos

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(bui

ldin

gsan

dst

ruct

ures

).Th

eva

luat

ion

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sets

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cond

ucte

dby

inde

pend

entv

alue

rs.

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erty

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ntan

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uipm

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sidia

ryLi

etuv

osD

ujos

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sure

dat

fair

valu

eon

busi

ness

com

bina

tion

(Not

e33

).In

Sept

embe

r201

5,th

ewh

ole

cate

gory

ofbu

ildin

gswa

ssu

bjec

tto

reva

luat

ion

with

refe

renc

eto

the

valu

ede

term

ined

byin

depe

nden

tpro

perty

valu

ers

Korp

orac

ijaM

atin

inka

iUAB

and

Obe

r-Hau

sN

ekiln

ojam

asTu

rtas

UAB

.The

valu

atio

nwa

spe

rform

edus

ing

the

sale

sco

mpa

rison

appr

oach

.In

the

opin

ion

ofm

anag

emen

tofL

ietu

vos

Duj

osAB

,in

2015

ther

ewe

reno

sign

ifican

tch

ange

sin

the

fair

valu

eof

othe

rca

tego

ries

ofpr

oper

ty,

plan

tan

deq

uipm

entt

hat

are

stat

edat

reva

lued

amou

nts.

Asat

31D

ecem

ber

2014

,pr

oper

ty,

plan

tan

deq

uipm

ent

ofsu

bsid

iary

Liet

uvos

Duj

osAB

was

mea

sure

dat

fair

valu

eon

busi

ness

com

bina

tion

(Not

e33

).

Asat

31D

ecem

ber

2015

,th

efa

irva

lue

ofpr

oper

ty,

plan

tan

deq

uipm

ent

ofsu

bsid

iary

Kaun

oEn

erge

tikos

Rem

onta

sU

ABwa

sde

term

ined

byin

depe

nden

tva

luer

usin

gth

esa

les

com

paris

onap

proa

ch(a

nalo

gous

sale

price

s)in

resp

ecto

fthe

cate

gory

ofim

mov

able

prop

erty

.Val

uatio

nof

othe

rca

tego

ries

ofas

sets

was

carri

edou

tusi

ngin

para

llelt

hesa

les

com

paris

onan

dth

ere

plac

emen

tcos

tm

etho

ds.A

sset

sth

atwe

reev

alua

ted

usin

gth

ere

plac

emen

tcos

tmet

hod

were

test

edfo

rim

pairm

ent,

asa

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noin

dica

tions

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ere

iden

tifie

d.

InN

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ber2

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valu

atio

nof

allb

uild

ings

and

stru

ctur

esof

subs

idia

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TVa

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carri

edou

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inde

pend

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alue

rInR

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ing

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sale

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ices

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agem

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head

just

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ese

asse

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men

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Dec

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air

valu

eas

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Dec

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5.

Asat

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inde

pend

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alua

tion

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sets

was

perfo

rmed

atth

eG

roup

with

resp

ect

toN

TVa

ldos

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(bui

ldin

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truct

ures

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mot

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es),

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OAB

and

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uvos

Duj

osAB

(bui

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truct

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valu

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sca

rried

outb

yin

depe

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mpa

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and

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Gro

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valu

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ecia

lists

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ber

2015

,oth

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roup

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dno

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uatio

nof

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ount

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ere

valu

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nswe

repe

rform

edno

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eth

an4

year

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oan

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ere

are

noin

dica

tions

ofa

sign

ifican

tdiff

eren

cebe

twee

nth

ene

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kam

ount

and

mar

ketv

alue

ofas

sets

stat

edat

reva

lued

amou

nt.

Rev

alua

tion

ofas

sets

ofLE

STO

ABin

2015

Asat

31De

cem

ber2

015,

LEST

OAB

revi

ewed

itspr

oper

ty,p

lant

and

equi

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tfor

any

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tdi

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een

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carry

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ntan

dth

efa

irva

lue.

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fair

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term

ined

by

man

agem

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sing

the

inco

me

appr

oach

.In

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opin

ion

ofm

anag

emen

t,th

efa

irva

lue

ofas

sets

did

notd

iffer

sign

ifican

tlyfro

mth

eca

rryin

gam

ount

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acco

rdin

gly

nore

valu

atio

nre

sult

was

reco

gnise

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efa

irva

lue

ofas

sets

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STO

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dth

ere

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rabl

eam

ount

ofin

vest

men

tin

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were

dete

rmin

edfo

rth

epu

rpos

eof

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Com

pany

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para

tefin

ancia

lst

atem

ents

usin

gth

esa

me

assu

mpt

ions

which

are

desc

ribed

inm

ore

deta

ilin

sect

ion

Valu

atio

nof

inve

stm

ents

insu

bsid

iarie

sin

the

Com

pany

'sse

para

tefin

anci

alst

atem

ents

.

Rev

alua

tion

ofas

sets

ofLE

STO

ABin

2014

LEST

OAB

acco

unts

fori

tspr

oper

ty,p

lant

and

equi

pmen

tatr

eval

ued

amou

ntin

acco

rdan

cewi

thIA

Sof

the

impl

emen

tatio

nof

the

prov

isio

nsof

para

grap

h31

ofIA

S16

,in

2014

the

Com

pany

carri

edou

tva

luat

ion

ofits

prop

erty

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ant

and

equi

pmen

twi

thre

fere

nce

toth

eva

luat

ion

repo

rtde

liver

edby

Erns

t&Yo

ung

Baltic

UAB,

and

dete

rmin

edth

efa

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lue

ofpr

oper

ty,p

lant

and

equi

pmen

t(in

clud

ing

cons

truct

ion

inpr

ogre

ss)e

qual

toEU

R68

3m

illion

asat

31D

ecem

ber2

014.

Itwa

sco

nclu

ded

that

the

fair

valu

eof

prop

erty

,pla

ntan

deq

uipm

entw

asEU

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8m

illion

lowe

rtha

nth

ene

tboo

kam

ount

ofEU

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301

milli

onas

at31

Dece

mbe

r201

4.A

sign

ifican

tch

ange

inth

efa

irva

lue

ofpr

oper

ty,

plan

tan

deq

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ent

was

mai

nly

caus

edby

appl

icatio

nof

econ

omic

obso

lesc

ence

.In

view

ofth

ede

cisio

nsad

opte

ddu

ring

2009

-201

5by

the

Natio

nalC

ontro

lC

omm

issio

nfo

rPric

esan

dEn

ergy

(the

Com

miss

ion)

and

base

don

econ

omic

obso

lesc

ence

estim

ates

(usi

ngth

ein

com

eap

proa

chfo

rval

uatio

nof

asse

ts),

the

valu

eof

prop

erty

,pla

ntan

deq

uipm

ento

fLE

STO

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slo

wert

han

that

dete

rmin

edun

dert

heco

stap

proa

ch.

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atio

nof

prop

erty

,pla

ntan

deq

uipm

ento

fLES

TOAB

was

carri

edou

tusi

ngth

ein

com

eap

proa

chan

dco

stap

proa

ch.V

alua

tion

ofas

sets

was

carri

edou

tin

the

follo

wing

stag

es:(

i)re

plac

emen

tcos

tof

new

asse

tswa

sde

term

ined

;(ii)

phys

ical

and

func

tiona

lobs

oles

cenc

eof

asse

tswa

ses

timat

ed;(

iii)po

ssib

lere

cove

rabi

lity

ofas

sets

was

asse

ssed

(usi

ngth

ein

com

eap

proa

ch).

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asse

ssm

entu

nder

the

inco

me

appr

oach

was

base

don

the

follo

wing

key

assu

mpt

ions

ofLE

STO

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hen

dete

rmin

ing

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pric

eca

pfo

rthe

dist

ribut

ion

serv

ices

for2

016

2020

inits

Certi

ficat

eN

oO

5-16

of19

Janu

ary

2015

,the

Com

miss

ion

appr

oved

the

rate

ofre

turn

onin

vest

men

tseq

ualt

o6.

79%

fort

his

perio

d;Th

isra

tewa

sus

edto

dete

rmin

ere

turn

onin

vest

men

tsin

2016

.The

rate

ofre

turn

onin

vest

men

tseq

ualt

o6.

13%

ases

tabl

ished

byth

eCo

mm

issi

onwa

sus

edin

2015

.In

resp

ecto

fthe

rem

aini

ngfo

reca

stca

shflo

wpe

riod

(201

720

24),

the

rate

ofre

turn

onin

vest

men

tseq

ualt

o7.

5%as

calcu

late

dby

the

Com

pany

was

used

assu

min

gth

atth

eC

ompa

ny's

lega

lcla

imwo

uld

besa

tisfie

din

term

sof

appl

icatio

nof

impr

oper

rate

ofre

turn

onin

vest

men

ts;

Cas

hflo

wswe

redi

scou

nted

usin

ga

pre-

tax

disc

ount

rate

of7.

5%;

Ope

ratin

gex

pens

esof

LEST

OAB

for2

016

2020

were

proj

ecte

dac

cord

ing

toth

eap

prov

edlo

ng-

term

plan

sof

LEST

OAB

.Sta

rting

from

2012

,the

chan

ges

were

proj

ecte

din

view

ofth

epr

ojec

ted

chan

ges

inth

eav

erag

ean

nual

cons

umer

pric

ein

dex

and

the

chan

ges

inwo

rkpa

yat

the

time

ofva

luat

ion;

Itwa

sas

sum

edth

atad

ditio

nalp

rofit

will

beea

rned

inin

divi

dual

regu

lato

rype

riods

due

toth

epl

anne

dop

erat

iona

leffi

cienc

yof

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com

pany

;

Inve

stm

ents

for2

015

2024

were

estim

ated

invie

wof

the

appr

oved

ten-

year

inve

stm

entp

lan;

F-111

245496 Olive pp138-imp 27/06/2017 09:22 Page 111

95AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Criticalaccou

ntingestim

ates

andjudgem

entsused

intheprep

arationof

thefin

ancialstatem

ents

Inth

eop

inio

nof

LEST

OAB

,the

amou

ntof

EUR

16.4

6m

illion

,by

whic

hLE

STO

AB's

reve

nue

for2

015

was

redu

ced

byth

eCo

mm

issio

n,wa

sre

ason

ably

incl

uded

inth

eop

erat

ing

expe

nses

ofth

ere

gula

ted

activ

ityfo

r201

120

13,a

ndas

sum

edth

atth

eco

urtw

ould

pass

afa

vour

able

rulin

gfo

rLES

TOAB

,and

the

afor

emen

tione

dam

ount

woul

dbe

inclu

ded

byth

eCo

mm

issi

onin

the

leve

lofL

ESTO

AB's

reve

nue

for2

017.

Inth

eop

inio

nof

LEST

OAB

,the

addi

tiona

lcom

pone

ntin

the

regu

late

das

setb

ase

asse

tin

the

Proc

edur

efo

rDet

erm

inin

gR

egul

ated

Price

sin

Elec

tric

Ener

gySe

ctor

appr

oved

byth

eLi

thua

nian

Gov

ernm

entR

esol

utio

nof

24Se

ptem

ber2

014

("the

Gov

ernm

entR

esol

utio

n"),

whic

his

calcu

late

das

the

diffe

renc

ebe

twee

nth

eca

rryin

gam

ount

ofth

eas

sets

and

the

regu

late

das

setb

ase

and

which

aros

eas

at30

June

2014

,had

tobe

incl

uded

inth

eco

stof

capi

talw

hen

dete

rmin

ing

the

leve

lof

reve

nue

ofLE

STO

ABfo

r201

5-20

16.L

ESTO

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eda

clai

mto

the

cour

treg

ardi

ngth

ein

clus

ion

ofth

eaf

orem

entio

ned

addi

tiona

lcom

pone

ntin

the

leve

lofr

even

ue,a

ndin

clud

edth

eca

shflo

wsre

latin

gto

the

addi

tiona

lcom

pone

ntof

the

regu

late

das

setb

ase

info

reca

stca

shflo

wswi

thpr

obab

ility

of50

%.

In20

14,

LEST

OAB

perfo

rmed

the

sens

itivity

anal

ysis

onfa

irva

lue

mea

sure

men

tin

resp

ect

ofch

ange

sin

unob

serv

able

inpu

tsus

ing

the

follo

wing

scen

ario

s:

Sens

itivity

anal

ysis

scen

ario

I:as

are

sult

ofch

ange

sin

the

curre

ntre

gula

tory

envi

ronm

enta

ndwh

ende

term

inin

gth

ele

velo

fLES

TOAB

'sre

venu

eby

the

Com

miss

ion

fort

hepe

riod

2017

-202

4,th

ere

turn

onin

vest

men

tin

resp

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F-112

245496 Olive pp138-imp 27/06/2017 09:22 Page 112

96AN

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FINAN

CIAL

STAT

EMEN

TS2015

|Criticalaccou

ntingestim

ates

andjudgem

entsused

inthepreparationof

thefin

ancialstatem

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terti

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capa

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serv

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gex

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20we

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plan

sof

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ges

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inth

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ting

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llbe

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vere

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sets

)wa

sca

lcul

ated

and

take

nin

toac

coun

twhe

nde

term

inin

gth

epr

ices

fore

lect

ricity

dist

ribut

ion

and

supp

lyse

rvic

esfo

roth

erre

gula

tory

perio

ds,i

nac

cord

ance

with

the

long

-run

aver

age

Met

hodo

logy

;9.

The

Com

pany

did

nott

ake

into

acco

untt

hepo

tent

ialf

avou

rabl

eou

tcom

esfro

mth

elit

igat

ion

proc

esse

s.

The

Com

pany

perfo

rmed

the

sens

itivity

anal

ysis

onth

eim

pairm

ent

test

inre

spec

tof

chan

ges

inun

obse

rvab

lein

puts

:

1.Th

ech

ange

sin

disc

ount

rate

sha

vea

sign

ifican

tim

pact

onth

ere

sult

ofva

luat

ion.

The

sens

itivity

anal

ysis

show

edth

ata

0.5

p.p.

chan

gein

disc

ount

rate

woul

dre

sult

inin

crea

sein

impa

irmen

trev

ersa

lup

toEU

R10

1.9

milli

on(a

tdis

coun

trat

eof

6.10

%)o

rin

impa

irmen

tof

EUR

17.0

milli

on(a

tdis

coun

trat

eof

7.10

%).

F-113

245496 Olive pp138-imp 27/06/2017 09:22 Page 113

97AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Criticalaccou

ntingestim

ates

andjudgem

entsused

inthepreparationof

thefin

ancialstatem

ents

2.If

fort

hepe

riods

star

ting

from

2021

,the

retu

rnon

inve

stm

ents

setb

yth

eC

omm

issio

nwh

ende

term

inin

gth

ere

venu

ele

velf

orLE

STO

ABwa

s10

%lo

wer

(i.e.

equa

lto

4.72

%),

the

fore

cast

reve

nue

ofLE

STO

AB(fo

rth

epe

riod

2016

-205

5)wo

uld

belo

wer

byEU

R31

8m

illion

.Thi

swo

uld

resu

ltin

addi

tiona

limpa

irmen

tofE

UR

23.3

milli

on.

Asat

31D

ecem

ber2

014,

the

Com

pany

perfo

rmed

the

impa

irmen

ttes

tin

resp

ecto

fits

inve

stm

enti

nth

esu

bsid

iary

LEST

OAB

and

reco

gnis

edim

pairm

ento

fEU

R55

.8m

illion

.The

impa

irmen

ttes

tin

resp

ecto

fthe

inve

stm

enti

nLE

STO

ABto

okin

toco

nsid

erat

ion

the

assu

mpt

ions

used

inlo

ng-te

rmfo

reca

sts

(as

desc

ribed

inse

ctio

n'R

eval

uatio

nof

asse

tsof

LEST

OAB

in20

14',

with

addi

tiona

lad

just

men

tsm

ade

toca

shflo

wsto

refle

ctth

ede

velo

pmen

tpro

spec

tsof

LEST

OAB

asa

com

pany

(i.e.

noto

nly

the

cash

flows

gene

rate

dfro

mpr

oper

ty,p

lant

and

equi

pmen

t).Di

scou

nted

cash

flows

were

adju

sted

invie

wof

netf

inan

cial

debt

and

inve

stm

ents

insu

bsid

iarie

s.

Liet

uvos

Duj

osAB

Asat

31D

ecem

ber2

015,

the

Com

pany

test

edfo

rim

pairm

enti

tsin

vest

men

tin

subs

idia

ryLi

etuv

osD

ujos

ABus

ing

the

disc

ount

edca

shflo

wm

etho

dan

dre

cogn

ised

impa

irmen

tofE

UR20

.4m

illion

,wh

ich

larg

ely

resu

lted

from

chan

ges

inth

ere

gula

tory

envi

ronm

ent.

The

Com

pany

estim

ated

the

fair

valu

ean

dva

lue

inus

eof

the

inve

stm

ent,

and

dete

rmin

edth

atth

eva

lue

inus

ewa

shi

gher

and,

ther

efor

e,tre

ated

asth

ere

cove

rabl

eam

ount

ofth

ein

vest

men

t.Fo

llowi

ngth

eim

pairm

ent,

the

reco

vera

ble

amou

ntof

the

inve

stm

entw

aseq

ualt

oEU

R15

1.6

milli

onas

at31

Dece

mbe

r201

5(3

1D

ecem

ber2

014:

EUR

174.

8m

illion

).Fo

rthe

impa

irmen

ttes

tofi

nves

tmen

tin

Liet

uvos

Duj

osAB

,the

Com

pany

used

the

follo

wing

key

assu

mpt

ions

:

1.Th

eva

lue

inus

ewa

ses

timat

edwi

thre

fere

nce

toth

efin

anci

alpl

anco

verin

gth

epe

riod

2016

-20

20,t

hepr

ojec

ted

pre-

tax

disc

ount

edca

shflo

wsus

ing

apr

e-ta

xwe

ight

edav

erag

eco

stof

capi

tal(

WAC

C)o

f6.6

0%.

2.C

ash

flow

fore

cast

swe

repr

epar

edby

the

man

agem

enti

nth

eco

urse

offin

anci

alpr

ojec

tions

base

don

the

finan

cial

perfo

rman

cere

sults

,m

arke

tde

velo

pmen

tex

pect

atio

nsan

dre

gula

tory

envi

ronm

ent.

The

proj

ectio

nsof

reve

nue

from

regu

late

dac

tivitie

sal

soto

okin

toac

coun

tthe

depr

ecia

tion

expe

nses

ofpr

oper

ty,

plan

tan

deq

uipm

ent

and

the

retu

rnon

inve

stm

ents

,whi

chwa

sca

lcula

ted

onth

eva

lue

ofas

sets

used

inth

ere

gula

ted

activ

ities.

Whe

nes

timat

ing

the

retu

rnon

inve

stm

ents

,the

man

agem

entu

sed

the

rate

ofre

turn

onin

vest

men

tsse

tby

the

Com

mis

sion

,whi

chwa

s7.

09%

fort

heye

ars

2016

-201

8an

d5.

59%

fort

heye

ar20

19an

dbe

yond

.3.

The

valu

ein

use

calcu

latio

nsin

clud

edon

lyth

ein

vest

men

tsne

cess

ary

tom

aint

ain

the

curre

ntas

set

base

and

appr

oved

unde

rth

efin

anci

alpl

an,

wher

eas

the

fair

valu

eca

lcul

atio

nsin

clud

edth

ein

vest

men

tsin

tend

edfo

rthe

deve

lopm

enta

ndm

oder

nisa

tion

ofth

eas

setb

ase.

4.Th

efo

reca

stca

shflo

wswe

reca

lcul

ated

with

refe

renc

eto

hist

orica

lda

ta,

natu

ral

gas

cons

umpt

ion

fore

cast

san

def

fect

ivele

gala

cts.

The

Com

pany

perfo

rmed

the

sens

itivity

anal

ysis

onth

eim

pairm

ent

test

inre

spec

tof

chan

ges

inun

obse

rvab

lein

puts

:

1.Th

era

teof

retu

rnon

inve

stm

ents

(sta

rting

from

2019

)has

asi

gnific

anti

mpa

cton

the

resu

ltof

valu

atio

n.Th

ese

nsitiv

ityan

alys

issh

owed

that

a1

p.p.

chan

gewo

uld

resu

ltin

incr

ease

inim

pairm

entu

pto

EUR

35.4

milli

on(a

trat

eof

retu

rnof

4.59

%)o

rdec

reas

ein

impa

irmen

tdo

wnto

EUR

5.4

milli

on(a

trat

eof

retu

rnof

7.10

%).

Ifst

artin

gfro

m20

19th

era

teof

retu

rnon

inve

stm

ents

did

notc

hang

e(i.

e.re

mai

nat

7.09

%le

vel),

the

reco

vera

ble

amou

ntwo

uld

beeq

uiva

lent

sto

the

fair

valu

e,wh

ich

woul

dbe

equa

lto

EUR

178.

2m

illion

(repr

esen

ting

EUR

6.2

milli

onsu

rplu

sof

the

reco

vera

ble

amou

ntov

erth

eco

stof

inve

stm

ent);

2.Th

ech

ange

sin

disc

ount

rate

also

have

asig

nific

anti

mpa

cton

the

resu

ltof

valu

atio

n.Th

ese

nsitiv

ityan

alys

issh

owed

that

a1

p.p.

chan

gein

disc

ount

rate

woul

dre

sult

inin

crea

sein

impa

irmen

tup

toEU

R34

.4m

illion

(atd

iscou

ntra

teof

7.60

%)o

rdec

reas

ein

impa

irmen

tdo

wnto

EUR

1.9

milli

on(a

tdisc

ount

rate

of5.

60%

).

Liet

uvos

Ener

gijo

sG

amyb

aAB

Asat

31D

ecem

ber2

015,

the

Com

pany

test

edfo

rim

pairm

enti

tsin

vest

men

tin

subs

idia

ryLi

etuv

osEn

ergi

jos

Gam

yba

ABan

dde

term

ined

noim

pairm

enti

nre

spec

toft

hein

vest

men

tas

at31

Dec

embe

r20

15.

Asat

31D

ecem

ber

2015

,in

the

opin

ion

ofth

eCo

mpa

ny's

man

agem

ent

ther

ewe

reno

indi

catio

nsof

impa

irmen

tin

resp

ecto

fthe

inve

stm

enti

nLi

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osEn

ergi

jos

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yba

AB.

Losg

istik

osC

entra

sUA

Ban

dde

term

ined

noim

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inre

spec

tof

the

inve

stm

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asat

31D

ecem

ber2

015.

Asat

31D

ecem

ber2

015,

inth

eop

inio

nof

the

Com

pany

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anag

emen

tthe

rewe

re

VAE

SPB

UAB

Asat

31D

ecem

ber2

015,

the

Com

pany

test

edfo

rim

pairm

enti

tsin

vest

men

tin

subs

idia

ryVA

ESP

BU

ABan

dre

cogn

ised

impa

irmen

tofE

UR1,

168

thou

sand

.

LITG

ASUA

B

Asat

30Ju

ne20

15,t

heC

ompa

nyte

sted

fori

mpa

irmen

tits

inve

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enti

nsu

bsid

iary

Litg

asU

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ing

the

disc

ount

edca

shflo

wm

etho

d.Di

scou

nted

cash

flows

were

calcu

late

din

acco

rdan

cewi

thth

eef

fect

ivele

gala

cts

and

met

hodo

logi

esre

gula

ting

the

activ

ityof

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desi

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pplie

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ngin

toco

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the

mos

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babl

esc

enar

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rthe

deve

lopm

ento

fthe

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astra

deac

tivity

and

unce

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tiese

xistin

gin

the

lique

fied

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dust

ry.D

isco

unte

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reca

lcula

ted

usin

ga

disc

ount

rate

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chis

esta

blish

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the

requ

ired

retu

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eca

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l.As

are

sult

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ean

alys

is,th

eC

ompa

ny's

man

agem

entd

eter

min

edth

atth

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enti

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equa

lto

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at30

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and

31De

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Asat

31D

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ther

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indi

catio

nsof

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tin

resp

ecto

foth

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side

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part

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the

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over

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lutio

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ardi

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com

pany

and

inve

stm

ento

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wne

das

sets

,whe

reby

the

Min

istry

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ergy

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com

mitt

edto

esta

blish

apr

ivat

elim

ited

liabi

lity

com

pany

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mak

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F-114

245496 Olive pp138-imp 27/06/2017 09:22 Page 114

98AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Criticalaccou

ntingestim

ates

andjudgem

entsused

inthepreparationof

thefin

ancialstatem

ents

The

purc

hase

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eag

reem

ento

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res

ofLi

tgrid

ABpr

ovid

efo

ra

prem

ium

toth

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heam

ount

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pend

son

the

regu

lato

ryen

viro

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tin

the

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repe

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.On

15Ja

nuar

y20

15,

the

Com

miss

ion

appr

oved

ane

wre

gula

tion

met

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unde

rwhi

chth

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nse

tth

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netw

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20.

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21Se

ptem

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Com

miss

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oved

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amen

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met

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ich

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price

caps

fore

lect

ricity

trans

miss

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twor

kswe

rere

calc

ulat

edfo

rthe

perio

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16-2

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and

appr

oved

unde

rRes

olut

ion

of19

Oct

ober

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.In

view

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men

tione

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velo

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ts,

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pany

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ssed

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price

prem

ium

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the

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rthe

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ldos

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InAp

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pany

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ired

the

shar

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ble

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the

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pend

ing

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efin

anci

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rform

ance

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max

imum

amou

ntof

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pric

epr

emiu

mis

equa

lto

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19,4

00th

ousa

nd.

The

Com

pany

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emen

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achi

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ted

fort

hem

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umpr

ice

prem

ium

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R19

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inam

ount

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e.Th

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ount

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rest

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scou

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g.Th

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quis

ition

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ein

vest

men

tin

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ount

ing.

The

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ount

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ctwi

llsub

sequ

ently

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cogn

ised

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ance

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Pric

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mfo

rthe

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erge

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esh

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purc

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nder

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ired

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ford

inar

yre

gist

ered

shar

esof

Kaun

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erge

tikos

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com

mis

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pto

part

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nder

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ena

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lyac

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lybu

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good

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gativ

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ount

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F-115

245496 Olive pp138-imp 27/06/2017 09:22 Page 115

99AN

NUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Criticalaccou

ntingestim

ates

andjudgem

entsused

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thefin

ancialstatem

ents

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expe

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ared

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lect

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clar

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ount

.In

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,the

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ount

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ceiv

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ased

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tain

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plet

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uch

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ivid

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indi

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ally

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from

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ts(c

olla

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l)pr

ovid

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even

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ing

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ence

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ampl

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ento

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tract

ual

term

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perfo

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lyas

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edre

ceiv

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into

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stor

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tatis

tics,

and

revi

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annu

ally

whet

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ioni

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tes

used

for

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sess

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with

the

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oric

alda

taof

impa

irmen

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es,a

ndth

atth

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tes

used

forc

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ctive

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sess

edre

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edfo

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ar.

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rthe

utilis

atio

nof

emis

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ces

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timat

espr

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ions

foru

tilisa

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ofem

issio

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lowa

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alem

issio

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erth

ere

porti

ngpe

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mul

tiplie

dby

the

mar

ketp

rice

for

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issi

onal

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nces

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quan

tity

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sions

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prov

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are

spon

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ority

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gfo

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tert

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dof

the

year

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sed

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perie

nce,

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timat

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F-116

245496 Olive pp138-imp 27/06/2017 09:22 Page 116

100

ANNUAL

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TS2015

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F-117

245496 Olive pp138-imp 27/06/2017 09:22 Page 117

101

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F-118

245496 Olive pp138-imp 27/06/2017 09:22 Page 118

102

ANNUAL

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F-119

245496 Olive pp138-imp 27/06/2017 09:22 Page 119

103

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104

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F-121

245496 Olive pp138-imp 27/06/2017 09:22 Page 121

105

ANNUAL

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F-122

245496 Olive pp138-imp 27/06/2017 09:22 Page 122

106

ANNUAL

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F-123

245496 Olive pp138-imp 27/06/2017 09:22 Page 123

107

ANNUAL

FINAN

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STAT

EMEN

TS2015

|Investmen

tsinsubsidiarie

sand

associates

On

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F-124

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108

ANNUAL

FINAN

CIAL

STAT

EMEN

TS2015

|Investmen

tsinsubsidiarie

sand

associates

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245496 Olive pp138-imp 27/06/2017 09:22 Page 126

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F-127

245496 Olive pp138-imp 27/06/2017 09:22 Page 127